Derive cash flow from operations presented with the direct method from annual report presentation that uses the indirect method Refer to the Statement of Cash Flows for Nordstrom Inc. in Exhibit 1.3. Derive cash flow from operations for a direct method presentation, such as that in Exhibit 5.1, for 2006. Use the information in that exhibit to fill in the spreadsheet template provided on the web site for this textbook. www.cengage.com/accounting/stickney. In that exhibit we have made some arbitrary choices, such as that all Accounts Payable relate to purchases of inventory and that changes in Other Assets and Other Liabilities relate to Other Income, net. When you finish, your answer should be the same as that given in Exhibit5.1.

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Nordstrom, Inc. Consolidated Statements of Cash Flows EXHIBIT 1.3 (amounts in thousands) Fiscal year 2006 2005 2004 Operating Activities Net earnings Adustments to reconcile net eamings to net cash provides by operating activities. Depreciation and amortization of buildngs and equipment Amortization of deferred property incentives and other, net Stock-based compensation expense Deferred income tares, net $677,999 $551,339 $393.450 284,520 36,293) 37,362 (58,274) 43,552 (38,293) 276,328 (33,350) 13.285 (11,238) 264,769 (31.378) B.051 (8,040) Tax benefa trom stock-based payments Excess tax benefit from stock based payments 41.092 25,442 Provisian for bad debt expense 17,064 20,918 24,639 Change in operating assets and iabilities ACCnunts receivatie nvestment in asset backes securities Merchandise inventoties (61,301) 127,984 (38,649) 14,723) (7,661) 84,291 48,719 23,533 (5,522) 30,723 17,334 1,142,365 (15,140) (135,790) (20,804) 1,035) 3,473) 31.721 (11,284) 38,755 (2.950) 149,970) (11.771) 3,163) (8,143) 23,930 15,055 58,471 (18.999) 19,837 7.116 606 346 Prepaid espenses Other assets ACCounts payatie Actrued salaries, Nages and retated benefits Other turrent liabities (33,877) 49.480 19.305 776,232 income tates pavabile Deferred praperty incentives Other labilities Net cash grovided by operating activities Investing Activities Capital espenditures (246 851) 5473 (3,232 250) (264,437) (271,659) 107 Proceeds trom sale of assets 224 Purchases of short term investments (109,550) 163,550 18,067) (218,280) (542,925) Sales of short term investments 530,750 3,366,425 Other, net Net cash sed in investing activities B,366) (292,093) 2830) 110.033) Financing Activities Principal payments on lang term deht lecrease increase e cash book averdratts Proceeds from esercise of stock options Proceeds from employee stock purcnase plan EICESS tar henefit trom stock hased payments Cash divisends paid Repurchase of common stack Other net (307,559) 50,853) 50,900 16,300 (101,047) 4,946 73.023 15.600 (205 252) 2,680) 87,061 12,892 38,293 (110,158) (621,527) 422 (87,196) (287,080) (352) (382,106) (67,240) 300,000) (752) (475,971) Net cash ised in financing activities (984,182) 102,033 360,623 $462,656 (60,097) 462,656 $402,559 20,342 340 281 $360,623 Cash and cash equivalents at begninng of year Cash and cash equivalents at end of year