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 2017 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 2017 2016 Cash Accounts receivable Long-term investments Equipment Accumulated depreciation-equipment Total $28,200 24,200 23,000 60,000 (14,000) $121,400 $ 19,600 10,000 60,000 31,800 $121,400 s 17,700 22,300 16,000 70,000 (10,000) $116,000 $ 11,100 30,000 45,000 29,900 $116,000 Accounts payable Notes payable Common shares Retained earnings Total