Use the A. Karev Medical Supplies data from P11-31 A. The cash amounts for Interest Revenue, Salary Expense, Interest Expense, and Income Tax Expense are the same as the accrual amounts for these items.

Requirements 1. Prepare the 2010 statement of cash flows by the direct method.

2. How will what you learned in this problem help you evaluate an investment in A. Karev Medical Supplies?

11-31

The 2010 comparative balance sheet and income statement of A. Karev Medical Supplies follow:

A. Karev Medical Supplies had no noncash investing and financing transactions during 2010. During the year, A. Karev Medical Supplies made no sales of land or equipment, no issuance of notes payable, no retirement of stock, and no treasury stock transactions.

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A. Karev Medical Supplies Comparative Balance Sheet December 31, 2010 and 2009 Plant Assets: Land Total Assets INCREASE 2010 2009 (DECREASE) Current Assets: Cash and Cash Equivalents $ 6,700 $ 5,300 $1,400 Accounts Receivable Inventory 25,300 26,900 (1,600) 91,800 89,800 2,000 89,000 60,000 29,000 Equipment, Net 53,500 49,400 4,100 $266,300 $231,400 $ 34,900 Current Liabilities: Accounts Payable $ 30,900 $35,400 $ (4,500) Accrued Liabilities 30,600 28,600 2,000 Long-Term Liabilities: Notes Payable Stockholders' Equity: 75,000 100,000 (25,000) Common Stock 88,300 64,700 23,600 Retained Earnings 41,500 2,700 38,800 Total Liabilities and Stockholders' Equity $266,300 $231,400 $ 34,900