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Statement of Cash Flows using the indirect method

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AAA Company's comparative balance sheet and income statement for last year appear below:

Balance Sheets

Ending Balance Beginning Balance

Cash $ 60,000 $ 25,000
Accounts Receivable 48,000 61,000
Inventory 56,000 48,000
Prepaid Expenses 13,000 19,000
Long-Term Investments 300,000 210,000
Plant and Equipment 470,000 470,000
Accumulated Depreciation (222,000) (188,000)

Total Assets $725,000 $645,000

Accounts Payable $ 59,000 $ 36,000
Accrued Liabilities 42,000 24,000
Taxes Payable 7,000 14,000
Bonds Payable 80,000 140,000
Deferred Taxes 38,000 23,000
Common Stock 110,000 70,000
Retained Earnings 389,000 338,000

Total Liabilities and Owners' Equity $725,000 $645,000

Income Statement

Sales $540,000

Less Cost of Goods Sold 300,000

Gross Margin 240,000

Less operating expenses 150,000

Net operating income 90,000

Less income taxes 27,000
---------------------------------------------
Net income $63,000

The company declared and paid $12,000 in cash dividends during the year.

Required: Prepare a Statement of Cash Flows using the indirect method

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Statement of Cash Flows (Indirect Method) for Millco, Inc
Discuss how the different sections of the statement of cash flows assist different sets of users
merits of using the direct method versus the indirect method of preparation

1) Prepare statement of cash flows (indirect method) using balance sheet data. Presented below {see attached} are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2004.

2) Write 350-500 words discussing how the different sections of the statement of cash flows assist different sets of users.

3) Also discuss the merits of using the direct method versus the indirect method of preparation

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