Reference no: EM13971521

During the year, Hepworth Company earned a net income of $61,725. Beginning and ending balances for the year for selected accounts are as follows:

Beginning	Ending
Cash	$108,000	$126,600
Accounts receivable	67,500	99,750
Inventory	36,000	52,500
Prepaid expenses	27,000	30,000
Accumulated depreciation	81,000	91,500
Accounts payable	45,000	55,125
Wages payable	27,000	15,000

There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows.

Required:

1.       Prepare a schedule of operating cash flows using the indirect method.

2.       Suppose that all the data in used Requirement 1 except that the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,475. What is the ending balance of accounts payable?

3.       CONCEPTUAL CONNECTION Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this year's operating cash flows? If not, what would you suggest be done?