A Condensed financial data of Arma Inc. follow. Prepare a statement of cash flows—indirect method.

(SO 4)

ARMA INC.

Comparative Balance Sheets December 31 Assets __ 2007 _ __ 2006 Cash $ 90,800 $ 48,400 Accounts receivable 92,800 33,000 Inventories 112,500 102,850 Prepaid expenses 28,400 26,000 Investments 138,000 114,000 Plant assets 270,000 242,500 Accumulated depreciation (50,000) (52,000)

Total $682,500 $514,750 Liabilities and Stockholders’ Equity Accounts payable $112,000 $ 67,300 Accrued expenses payable 16,500 17,000 Bonds payable 110,000 150,000 Common stock 220,000 175,000 Retained earnings 224,000 105,450 Total $682,500 $514,750 ARMA INC.

Income Statement Data For the Year Ended December 31, 2007 Sales $392,780 Less:

Cost of goods sold $135,460 Operating expenses, excluding depreciation 12,410 Depreciation expense 46,500 Income taxes 27,280 Interest expense 4,730 Loss on sale of plant assets 7,500 233,880 Net income $158,900 632 CHAPTER 12 Cash from operations

$185,250 Prepare a statement of cash flows—direct method.

(SO ¢)

Cash from operations

$185,250 Prepare a statement of cash flows—indirect method.

(SO 4)

Cash from operations

$105,000 Statement of Cash Flows Additional information: 1. New plant assets costing $85,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $57,500 were sold for $1,500 cash. 3. Bonds matured and were paid off at face value for cash. 4. A cash dividend of $40,350 was declared and paid during the year.

Instructions Prepare a statement of cash flows using the indirect method.