(A5Q3)

Strong Shoes Limiteds comparative balance sheet is presented below. Strong reports under ASPE.

STRONG SHOES LIMITED Balance Sheet December 31
Assets	2024	2023
Cash	$28,200	$17,700
Accounts receivable	24,200	22,300
Long-term investments	23,000	16,000
Equipment	60,000	70,000
Accumulated depreciation- equipment	(14,000)	(10,000)
Total assets	$121,400	$116,000
Liabilities and Shareholders Equity
Accounts payable	$19,600	$11,100
Notes payable	10,000	30,000
Common shares	60,000	45,000
Retained earnings	31,800	29,900
Total liabilities and shareholders equity	$121,400	$116,000

Additional Information:

Profit for the year was $28,300. Dividends declared and paid were $26,400.

Equipment that cost $10,000 and had accumulated depreciation of $1,200 was sold for $4,300.

All other changes in non-current account balances had a direct effect on cash flows, except the change in accumulated depreciation.

Instructions

1. Prepare a cash flow statement for 2024 using the indirect method.

2. Calculate free cash flow.

3. Strong Shoes is considering changing its method of reporting operating activities from the indirect method to the direct method. Why would the company want to do that? How would this affect the net cash provided (used) by operating activities? Explain.