Use the following balance sheets and income statement to answer QS 12-3 through QS 12-8. Use the QS I 2-3 indirect method to prepare the cash provided (used) from operating activities section only of the Computing cash from statement of cash flows.

Transcribed Image Text:

ORWELL, INC. Comparative Balance Sheets December 31, 2005 2005 2004 Assets Cash 95,800 $ 25,000 Accounts receivable (net) 42,000 52,000 Inventory 86,800 96,800 ORWELL, INC. Income Statement For Year Ended December 31, 2005 Prepaid expenses 6,400 5,200 Furniture 110,000 120,000 Accum. depreciation-Furniture (18,000) (10,000) Total assets $323,000 $289,000 Sales... $468,000 Cost of goods sold 312,000 Liabilities and Equity Gross profit 156,000 Accounts payable $ 16,000 $ 22,000 Operating expenses Wages payable 10,000 6,000 Depreciation expense $38,600 Income taxes payable 2,400 3,600 Other expenses. 57,000 95,600 Notes payable (long-term) 30,000 70,000 Income before taxes 60,400 Common stock, $5 par value 230,000 180,000 Income taxes expense 24,600 Retained earnings 34,600 7,400 Net income :.. $ 35,800 Total liabilities and equity $323,000 $289,000