Strong Shoes? comparative balance sheet is presented below. Strong reports under ASPE.

Additional information:

1. Profit was $28,300. Dividends declared and paid were $26,400.

2. Equipment that cost $10,000 and had accumulated depreciation of $1,200 was sold for $4,300.

3. All other changes in non-current account balances had a direct effect on cash flows, except the change in accumulated depreciation.

Instructions

a. Prepare a statement of cash flows for 2021 using the indirect method.

b. Calculate free cash flow.

Taking It Further

Strong Shoes is considering changing its method of reporting operating activities from the indirect method to the direct method. Why would the company want to do this? How would this affect the net cash provided (used) by operating activities? Explain.

Transcribed Image Text:

STRONG SHOES Balance Sheet December 31 Assets 2021 2020 Cash $ 28,200 $ 17,700 Accounts receivable 24,200 22,300 Long-term investments Equipment Accumulated depreciation-equipment 23,000 16,000 60,000 70,000 (14,000) (10,000) Total $121,400 $116,000 Liabilities and Shareholders' Equity $ 19,600 $ 11,100 Accounts payable Notes payable 10,000 30,000 Common shares 60,000 45,000 Retained earnings 31,800 29,900 Total $121,400 $116,000