Prepare the statement of cash flow under the indirect


Assignment: Direct and Indirect Cash Flow Models

Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts a and b. Then paste the Excel data into a Word document on which you can also write the answer to part c.

Label each exercise or problem clearly. Use APA formatting and citation if needed.

The Carpet Company's 20X2 and 20X3 balance sheets included the following items:

 

December 31


20X3

20X2

Debits



Cash

$10,500

$ 4,000

Accounts receivable

8,000

9,000

Merchandise inventory

21,000

18,000

Equipment

18,000

15,000

Totals

$57,500

$46,000

 



Credits



Accumulated depreciation, equipment

$4,000

$3,000

Accounts payable

7,000

5,000

Taxes payable

1,000

2,000

Dividends payable

1,500

0

Common stock, $10 par value

27,000

25,000

Contributed capital in excess of par, common stock

6,000

5,000

Retained earnings

11,000

6,000

Totals

$57,500

$46,000

The Carpet Company's income statement was as follows:

CARPET COMPANY
Income Statement
For the Year Ended December 31, 20X3

 



Sales


$61,000

Cost of goods sold

$40,000


Wages and other operating expenses

6,300


Income taxes expense

4,200


Depreciation expense

1,500

52,000

Net income


9,000

Additional information includes the following:

• Equipment costing $3,500 was purchased during the year.
• Fully depreciated equipment that cost $500 was discarded and its cost and accumulated depreciation were removed from the accounts.
• Two hundred shares of stock were sold and issued at $15 per share.
• The company declared $4,000 of cash dividends and paid $2,500.

Required:

a. Prepare the statement of cash flow under the direct method for the year ended December 31, 20X3.
b. Prepare the statement of cash flow under the indirect method for the year ended December 31, 20X3.
c. Provide a statement between 200 and 300 words in length for senior management. The topic is the status of the company based on cash flow.

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Financial Accounting: Prepare the statement of cash flow under the indirect
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