Exercise 16-7 Preparing the statement of cash flows (indirect method) LO2, 5, 6

Western Environmental Inc.
Comparative Balance Sheet Information
	June 30
	2020			2019
Cash	$	90,360		$	36,000
Accounts receivable (net)		93,000			73,800
Inventory		80,130			116,130
Prepaid expenses		6,450			6,210
Equipment		153,000			141,000
Accumulated depreciation		33,000			9,000
Accounts payable		30,600			37,800
Wages payable		7,800			18,600
Income taxes payable		2,850			4,290
Notes payable (long-term)		45,000			81,000
Common shares		273,000			213,000
Retained earnings		30,690			9,450

Western Environmental Inc.
Income Statement
For Year Ended June 30, 2020
Sales				$	783,000
Cost of goods sold					478,200
Gross profit				$	304,800
Operating expenses:
Depreciation expense	$	70,290
Other expenses		80,370
Total operating expenses					150,660
Profit from operations				$	154,140
Gain on sale of equipment					1,800
Profit before taxes				$	155,940
Income taxes					54,140
Profit				$	101,800

Required: Use the Western Environmental Inc. information given below to prepare a statement of cash flows for the year ended June 30, 2020, using the indirect method. (List any deduction in cash and cash outflows as negative amounts.)

1. A note is retired at carrying value.
2. The only changes affecting retained earnings during 2020 are profit and cash dividends paid.
3. New equipment is acquired during 2020 for $68,490.
4. The profit on sale of equipment costing $56,490 during 2020 is $1,800.
5. Prepaid expenses and wages expense affect other expenses on the income statement.
6. All sales and purchases of merchandise were on credit.

WESTERN ENVIRONMENTAL INC. Statement of Cash Flows For Year Ended June 30, 2020 Cash flows from operating activities: Adjustments to reconcile profit to net cash provided by operating activities: Cash flows from investing activities: Cash flows from financing activities