Statement of Cash Flows Using a Work Sheet—Indirect Method Refer to all of the facts in Problem 12-1A.

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. Briefly explain how Madison was able to increase its cash balance during a year in which it incurred a net loss.

December 31 2010 2009 $ 12,000 $ 10,000 Cash Accounts receivable 10,000 12,000 Inventory Prepaid rent 8,000 7,000 1,000 1,200 Land 75,000 75,000 Plant and equipment 200,000 150,000 Accumulated depreciation (75,000) (25,000) $230,000 Totals $231,200 $ 15,000 $ 15,000 Accounts payable Income taxes payable Short-term notes payable Bonds payable Common stock 2,500 2,000 20,000 22,500 50,000 75,000 100,000 100,000 Retained earnings 18,700 40,500 $230,000 Totals $231,200