. Prepare the statement of cash flows ( indirect method).. Following are the income statements for Ocoee Oil Company for the year ended December 31, 2011, and the balance sheets at December 31, 2010 and 2011. Sales revenue Cost of goods sold Gross margin Other expenses: Wages and salaries Depreciation and depletion Miscellaneous Total other expenses Income before taxes Income taxes Net income Ocoee Oil Company Income Statement For the Year Ended December 31, 2011 $32,000 4,500 12,400 $150,000 63,000 87,000 48,900 38,100 8,200 $ 29,900 Assets Current assets: Cash Accounts receivable Inventory Total current assets Property, plant, and equipment Equipment Less: accumulated depreciation Total property, plant, and equipment Total assets Liabilities and shareholders equity Current liabilities: Accounts payable Salaries payable Taxes payable Total current liabilities Notes payable Total liabilities Shareholders equity Common stock Retained earnings Total shareholders equity Total liabilities and shareholders equity December 31, 2011 $ 39,000 (15,600) $ 5,700 1,300 2,100 $ 9,100 10,000) $ 40,000 15,400 $ 0 2,900 60,000 $ 62,900 62,200 $125,100 $ 39,800 85,300 $125,100 December 31, 2010 $ 6,400 2,700 42,000 $51,100 23,400 $74,500 $19,100 55,400 $74,500 Ocoee Oil Company Comparative Balance Sheets $ 82,300 (20,100) $ 6,400 1,500 1,900 $ 9,800 30,000 $ 40,000 45,300 Requirements 1. Prepare a statement of cash flows for the year ended December 31, 2011, using (1) the direct method and (2) the indirect method. 2. Why is the statement of cash flows important to the company and to parties external to the company? 3. As a user, which formatdirect or indirectwould you prefer and why? 4. Evaluate the way in which the company spent its cash during the year. Do you think the company is in a sound cash position? 5. Compute the firms free cash flow.