The income statement for the year ended December 31, 2020, for Laskowski Manufacturing Company contains the following condensed information.

Included in operating expenses is a $24,000 loss resulting from the sale of machinery for $270,000 cash. The company purchased machinery at a cost of $750,000. Laskowski reports the following balances on its comparative balance sheets at December 31.

Income tax expense of $353,000 represents the amount paid in 2020. Dividends declared and paid in 2020 totaled $200,000.

Accounting

Prepare the statement of cash flows using the indirect method.

Analysis

Laskowski has an aggressive growth plan, which will require significant investments in plant and equipment over the next several years. Preliminary plans call for an investment of over $500,000 in the next year. Compute Laskowski?s free cash fl ow (from Chapter 5) and use it to evaluate the investment plans with the use of only internally generated funds.

Principles

How does the statement of cash flows contribute to achieving the objective of financial reporting?

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Laskowski Co. Income Statement Revenues Operating expenses (excluding depreciation) Depreciation expense Income before income tax Income tax expense Net income $6,583,000 $4,920,000 880,000 5,800,000 783,000 353,000 $ 430,000 Laskowski Co. Comparative Balance Sheets (partial) 2020 2019 Cash Accounts receivable $672,000 $130,000 775,000 834,000 521,000 610,000 Inventory Accounts payable 867,000 501,000