1.Use the following financial statements and additional information to (1) what does a statement of cash flows for the year ended December 31, 2013 using the indirect method look like, and (2) compute the company's cash flow on total assets ratio for 2013.

Wescott Company

Balance Sheets

At December 31

2013

2012

Assets:

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

$85,600

$65,200

Accounts receivable, net...............................................

72,850

56,750

Merchandise inventory..................................................

157,750

144,850

Prepaid expenses...........................................................

6,080

12,680

Equipment...................................................................

280,600

245,600

Accumulated depreciation-Equipment...........................

(80,600

)

(97,600

)

Total assets.....................................................................

$522,280

$427,480

Liabilities:

Accounts payable..........................................................

$52,850

$45,450

Income taxes payable....................................................

15,240

12,240

Notes payable (long term).............................................

59,200

79,200

Total liabilities................................................................

$127,290

$136,890

Equity:

Common stock.............................................................

200,000

150,000

Paid-in capital in excess of par.......................................

53,000

40,000

Retained earnings.........................................................

141,990

100,590

Total equity.....................................................................

$394,990

$290,590

Total liabilities and equity................................................

$522,280

$427,480

Wescott Company

Income Statement

For Year Ended December 31, 2013

Sales.............................................................

$488,000

Cost of goods sold.........................................

$212,540

Depreciation expense.....................................

43,000

Other operating expenses...............................

106,260

Interest expense.............................................

6,400

(368,200

)

Other gains (losses):

Gain on sale of equipment...........................

4,700

Income before taxes.......................................

124,500

Income taxes expense....................................

41,100

Net income...................................................

$ 83,400

Additional Information

a. A $20,000 note payable is retired at its carrying value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $120,000 cash.

d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.

e. Prepaid expenses relate to Other Expenses on the income statement.

f. All purchases and sales of merchandise inventory are on credit.