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.
The Carpet Company's 20 × 2 and 20 × 3 balance sheets included the following items:

The Carpet Company's income statement was as follows:

€¢ 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, 20 × 3.
b. Prepare the statement of cash flow under the indirect method for the year ended December 31 20 × 3.

Transcribed Image Text:

December 31 20X3 20X2 Debits $4,000 S10,500 Cash 9,000 8,000 Accounts receivable 18,000 21,000 Merchandise inventory 15,000 18,000 Equipment $46,000 $57,500 Totals Credits $3,000 $4,000 Accumulated depreciation, equipment 5,000 7,000 Accounts payable 2,000 1,000 Taxes payable 1,500 Dividends payable 25,000 27,000 Common stock, $10 par value 5,000 6,000 Contributed capital in excess of par, common stock 11,000 6,000 Retained earnings $46,000 $57,500 Totals CARPET COMPANY Income Statement For the Year Ended December 31, 20X3 S61,000 Sales Cost of goods sold $40,000 6,300 4,200 Wages and other operating expenses Income taxes expense Depreciation expense 1,500 52,000 Net income 9,000