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

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 increased during such an unprofitable year. Include in your memo your recommendations for improving the company’s bottom line.

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) Loss before interest and taxes Interest expense 10,000 $ (60,000) Net loss