Statement of Cash Flows—Indirect Method Refer to all of the facts in Problem 12-6A.

Presented here are comparative balance sheets:

Required

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

2. On the basis of your statement in (1), draft a brief memo to the president to explain why cash increased during such an unprofitable year. Include in your memo your recommendations for improving the company’s bottom line.

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For the Year Ended December 31, 2010 $350,000 Sales revenue Cost of goods sold Gross profit Operating expenses 150,000 $200,000 250,000 $ (50,000) 10,000 $ (60,000) Loss before interest and taxes Interest expense Net loss