Posted: July 19th, 2016

Prepare the statement of cash flow under the direct method for the year ended December 31, 2010.

CARPET COMPANY
Income Statement
For the Year Ended December 31, 2010
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
Required:

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:

1(A). Prepare the statement of cash flow under the direct method for the year ended December 31, 2010.
2(B). Prepare the statement of cash flow under the indirect method for the year ended December 31, 2010.
3(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.