Statement of Cash Flows Using a Work Sheet—Indirect Method Refer to all of the facts in Problem 12-3.

Statement of Cash Flows—Indirect Method Refer to all of the facts in Problem 12-3.

Presented here are comparative balance sheets:

Required

1. Using the format in the chapter’s appendix, prepare a statement of cash flows work sheet.

2. Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities section.

3. On the basis of your statement in (2), draft a brief memo to the president to explain why cash decreased during such a profitable year. Include in your explanation any recommendations for improving the company’s cash flow in future years.

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December 31 2010 2009 $ 130,000 $ 148,000 Accounts payable Other accrued liabilities 68,000 63,000 Income taxes payable 90,000 $ 288,000 $ 350,000 $ 550,000 489,000 $1,039,000 $ 1,677,000 110,000 $ 321,000 $ 300,000 $ 400,000 324,000 $ 724,000 $1,345,000 Total current liabilities Long-term bank loan payable Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity