Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts a and b. Then paste the Excel data into a Word document on which you can also write the answer to part c.

Label each exercise or problem clearly. Use APA formatting and citation if needed. The Carpet Company's 20X2 and 20X3 balance sheets included the following items:

	December 31
	2010	2009
Debits
Cash	$10,500	$ 4,000
Accounts receivable	8,000	9,000
Merchandise inventory	21,000	18,000
Equipment	18,000	15,000
Totals	$57,500	$46,000
Credits
Accumulated depreciation, equipment	$4,000	$3,000
Accounts payable	7,000	5,000
Taxes payable	1,000	2,000
Dividends payable	1,500	0
Common stock, $10 par value	27,000	25,000
Contributed capital in excess of par, common stock	6,000	5,000
Retained earnings	11,000	6,000
Totals	$57,500	$46,000

The Carpet Company's income statement was as follows:

CARPET COMPANY Income Statement For the Year Ended December 31, 2010
Sales		$61,000
Cost of goods sold	$40,000
Wages and other operating expenses	6,300
Income taxes expense	4,200
Depreciation expense	1,500	52,000
Net income		9,000

Additional information includes the following:

Equipment costing $3,500 was purchased during the year.

Fully depreciated equipment that cost $500 was discarded and its cost and accumulated depreciation were removed from the accounts.

Two hundred shares of stock were sold and issued at $15 per share.

The company declared $4,000 of cash dividends and paid $2,500.

Required:

Prepare the statement of cash flow under the direct method for the year ended December 31, 20X3.

Prepare the statement of cash flow under the indirect method for the year ended December 31, 20X3.

Provide a statement between 200 and 300 words in length for senior management. The topic is the status of the company based on cash flow.

All negative cash outlflows should be entered as a negative number including a net loss

Carpet Company- Statement of Cash Flows (Direct Method) For Year Ending Dec. 31, 2010

Cash Flow from Direct Operating Activities

Cash flows from operating:

Cash received from customers:

Cash paid for merchandise:

Cash paid for wages/other operating expenses:

Cash paid for income taxes:

Net cash flow - operating activities: (Total)

0

Cash flows from investing:

Cash paid for equipment: _________

Net cash flow - operating activities: (Total) ------------------------------------- +I15

0

Cash flows from financing:

Cash received from issuing stock: ________

Cash paid for Dividends: ________

Net cash flow financing activities: ------------------------------------------------ +I19+I20

0

Reconciliation Statement of Cash Flows (Direct Method)- For Year Ending Dec. 31, 2010

Net increase in cash from 2009 to 2010: __________

0

Cash balance at prior year (2009): __________

0

Cash balance at current year-end (2010): __________

0

See: Next page for Carpet Company- Statement of Cash Flows (Indirect Method) For Year Ending Dec. 31, 2010

Carpet Company- Statement of Cash Flows (Direct Method) For Year Ending Dec. 31, 2010

Cash flows from operating:

Net income:________

The following are the adjustments

to reconcile net income to cash provided by operations.

Adjustment in accounts receivables: ________

Adjustment in merchandise inventory: ________

Adjustment in accounts payable: ________

Adjustment in income taxes payable: ________

Add back depreciation expense: ________

Net cash flow - operating activities: (Total) ---------------------- _______________

0

(Cash flow from Investing and from financing activities and reconciliation are the same under direct and indirect methods)

Cash flows from investing:

Cash paid for equipment: _________

Net cash flow - operating activities: (Total) ------------------------------------- +I15

0

Cash flows from financing:

Cash received from issuing stock: ________

Cash paid for Dividends: ________

Net cash flow financing activities: ------------------------------------------------ +I19+I20

0

Reconciliation Statement of Cash Flows (Direct Method)- For Year Ending Dec. 31, 2010

Net increase in cash from 2009 to 2010: __________

0

Cash balance at prior year (2009): __________

0

Cash balance at current year-end (2010): __________

0

For Indirect Method- Cash Flow Rules- These rules are based on comparison of a previous year's balance sheet to a current balance sheet and apply to the

assets and liabilities line items from a previous year's balance to a current year's balance.

Cash Flow Rules are:

If Assets go up from the previous year to the current year, it is a use of cash (Company increased assets and decreased cash)

If Assets go down from the previous year to the current year, it is a source of cash (Company sold assets and increased cash)

If Liabilities go up from the previous year to the current year, it is a source of cash (Company increased its cash flow by using debt)

If Liabilities go down from the previous year to the current year, it is a use of cash (Company decreased cash flow by paying debt)