Answer & explanation Generated by AI To prepare Brown's statement of cash flows using the indirect method, follow these steps: Cash Flow Statement using the Indirect Method: Operating Activities: Net Income: Not provided directly, but changes in current assets and liabilities, and non$-$cash items like depreciation, need to be considered. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Expense: $$21,000$Changes in Working Capital: Increase in Accounts Receivable: $64,60068,600=4,00064,60068,600=4,000$Increase in Merchandise Inventory: $85,00077,000=8,00085,00077,000=8,000$Increase in Accounts Payable: $57,50055,400=2,10057,50055,400=2,100$Decrease in Income Tax Payable: $14,70016,200=1,50014,70016,200=1,500$ Investing Activities: Purchase of Equipment: $51,00051,000$ Acquisition of Land by Issuing Long$-$term Notes: $00($Non$-$cash, included separately$)$ Sale of Building: Cash received: $69,50069,500$Gain on Sale of Building: $2,0002,000$Book Value: $55,00055,000$ Financing Activities: Issuance of Common Stock for Cash: $38,00038,000$ Payment of Notes Payable: $51,10051,100$ Issuance of Notes Payable to Borrow Cash: $72,00072,000$ Payment of Cash Dividends: $46,00046,000$ Statement Format: Cash Flows from Operating Activities: Net$$Income:$$Adjustments:$$Depreciation$$Expense:$+21,000$Decrease$$in$$Accounts$$Receivable:$4,000$Increase$$in$$Inventory:$8,000$Increase$$in$$Accounts$$Payable:$+2,100$Decrease$$in$$Income$$Tax$$Payable:$1,500$Net$$Income$$:$$Adjustments:$$Depreciation$$Expense$$:$+21,000$Decrease$$in$$Accounts$$Receivable$$:$4,000$Increase$$in$$Inventory$$:$8,000$Increase$$in$$Accounts$$Payable$$:$+2,100$Decrease$$in$$Income$$Tax$$Payable$$:$1,500$ Cash Flows from Investing Activities: Purchase$$of$$Equipment:$51,000$Cash$$received$$from$$Sale$$of$$Building:$69,500$Purchase$$of$$Equipment$$:$51,000$Cash$$received$$from$$Sale$$of$$Building$$:$69,500$ Cash Flows from Financing Activities: Issuance$$of$$Common$$Stock$$for$$Cash:$+38,000$Payment$$on$$Notes$$Payable:$51,100$Issuance$$of$$Notes$$Payable:$+72,000$Payment$$of$$Dividends:$46,000$Issuance$$of$$Common$$Stock$$for$$Cash$$:$+38,000$Payment$$on$$Notes$$Payable$$:$51,100$Issuance$$of$$Notes$$Payable$$:$+72,000$Payment$$of$$Dividends$$:$46,000$ Non$-$Cash Investing and Financing Activities: Acquisition of Land by Issuing Long$-$term Notes Payable: $$122,000$ Gain on Sale of Building: $$2,000($included in net income adjustment, not a cash flow item$)$