Reference no: EM131454811

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.

<cash flows.xlsx>

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.