Statement of Cash Flows Using a Work Sheet—Indirect Method Refer to all of the facts in Problem 12-6A.

Presented here are comparative balance sheets:

Required

1. Using the format in the chapter’s appendix, prepare a statement of cash flows work sheet.

2. Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities section.

3. On the basis of your statement in (2), draft a brief memo to the president to explain why cash increased during such an unprofitable year. Include in your memo your recommendations for improving the company’s bottom line.

Transcribed Image Text:

For the Year Ended December 31, 2010 $350,000 Sales revenue Cost of goods sold Gross profit Operating expenses 150,000 $200,000 250,000 $ (50,000) Loss before interest and taxes Interest expense 10,000 $ (60,000) Net loss