Preparing a Complex Statement of Cash Flows (Indirect Method) Rocky Mountain Chocolate Factory manufactures an extensive line of premium chocolate candies for sale at its franchised and company-owned stores in malls throughout the United States. Its balance sheet for the first quarter of a recent year is presented in Appendix 1. These are some selected accounts and transactions that you need to take into account: a. Net income was $163,837. Notes and accounts receivable due after one year relate to operations. Likewise, "Other" current assets refer to operating activities. b. Depreciation and amortization totaled $282,205. c. No "other" noncurrent assets (which relate to investing activities) were purchased this period. d. No property, plant, and equipment were sold during the period. No goodwill was acquired or sold. e. Proceeds from issuance of long-term debt were $4,659,466, and principal payments were $2,355,029. (Combine the current maturities with the long-term debt in your analysis.) f. No dividends were declared or paid. g. Ignore the "deferred tax asset" and "deferred income taxes" accounts. Required: a) Prepare a statement of cash flows for the year using the indirect method. b) Evaluate the quality of the company's income. c) To what extent was the company able to finance purchases of property, plant and equipment with cash provided by operating activities? ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. Balance Sheets Assets Current assets Cash and cash equivalents Accounts and notes receivable-trade, less allowance for doubtful accounts of $43,196 at May 31 and $28,196 at February 29 Inventories Deferred tax asset Other Total current assets Property and equipmentat cost Less accumulated depreciation and amortization Other assets Notes and accounts receivable due after one year Goodwill and other intangibles, net of accumulated amortization of $259,641 at May 31 and $253,740 at Feb. 29 Other Liabilities and Equity Current liabilities May 31 (Unaudited) February 29 $ 921,505 $ 528,787 1,602,582 1,463,901 2,748,788 2,504,908 59,219 59,219 581,508 224,001 5,913,602 4,780,816 14,010,796 12,929,675 (2,744,388) (2,468,084) 11,266,408 10,461,591 $ 100,206 $ 111,588 330,359 336,260 574,130 624,185 1,004,695 1,072,033 $18,184,705 $16,314,440 Short-term debt $ 0 $ 1,000,000 Current maturities of long-term debt 429.562 134,538 Accounts payable-trade 1,279,455 998.520 Accrued liabilities 714.473 550,386 Income taxes payable 11.198 54,229 Total current liabilities 2,434,688 2,737,673 4,193,290 2,183,877 275,508 275,508 Long-term debt, less current maturities Deferred income taxes Stockholders' Equity Common stock-authorized 7,250,000 shares, $0.03 par value; issued 3,034,302 shares at May 31 and at Feb. 29 91,029 91,029 Additional paid-in capital 9,703,985 9.703.985 Retained earnings 2,502,104 2,338,267 12,297,118 12,133,281 Less common stock held in treasury, at cost-129,153 shares at May 31 and at February 29 1,015,899 1,015,899 11,281,219 11,117,382 $18,184,705 $16,314,440 The accompanying notes are an integral part of these statements