Prepare statement of cash flows—indirect method (Learning Objective 3)

20–25 min.

The income statement and additional data of Sunbelt Services, Inc., follow:

Sunbelt Services, Inc.

Income Statement Year Ended September 30, 2014 Revenues:

Sales Revenue Dividend Revenue Total Revenues Expenses:

Cost of Goods Sold Salaries Expense Depreciation Expense Advertising Expense Interest Expense Income Tax Expense Total Expenses Net Income

$313,000 206,000

$107,000

$307,000 6,000

$112,000 56,000 18,000 7,000 1,000 12,000 Additional data follows:

a. Acquisition of fixed assets totaled $131,000. Of this amount, $106,000 was paid in cash and a $25,000 note payable was signed for the remainder.

b. Proceeds from sale of land totaled $23,000. No gain or loss was recognized on the sale.

c. Proceeds from issuance of common stock totaled $37,000.

d. Payment of long-term note payable was $13,000.

e. Payment of dividends was $9,000.

f. Data from the comparative balance sheet follow:

Current Assets:

Cash....................................................................................................

Accounts Receivable ...........................................................................

Inventory.............................................................................................

Current Liabilities:

Accounts Payable................................................................................

Accrued Liabilities...............................................................................

September 30

$87,000 43,000 33,000

$31,000 12,000 2014

$23,000 59,000 29,000

$25,000 23,000 2013 Requirements 1. Prepare Sunbelt Services’ statement of cash flows for the year ended September 30, 2014, using the indirect method.

2. Calculate Sunbelt Services’ free cash flow for the year ended September 30, 2014.

3. Evaluate Sunbelt Services’ cash flows for the year. In your evaluation, mention all three categories of cash flows as well as free cash flow and give the reason for your evaluation.

AppendixLO1