Exercise 16-7 Preparing the statement of cash flows (indirect method) LO2, 5, 6 34 02:48:48 Western Environmental Ine. Comparative Balance Sheet Information June 30 2020 2019 Cash $ 92,160 $ 47,000 Accounts receivable (net) 102,000 75,600 Inventory 80,220 116,220 Prepaid expenses 6,540 6,300 Equipment 162,000 150,000 Accumulated depreciation 34,800 18,000 Accounts payable 32,400 39,600 Wages payable 9,600 20,400 Income taxes payable 2,940 4,380 Notes payable (long-term) 54,000 90,000 Common shares 282,000 222,000 Retained earnings 27,180 740 eBook $792,000 480,000 $312,000 Western Environmental Inc. Income Statement For Year Ended June 30, 2020 Sales Cost of goods sold Gross profit Operating expenses: Depreciation expense $ 70,380 Other expenses 80, 460 Total operating expenses Profit from operations Gain on sale of equipment Profit before taxes Income taxes Profit 150,840 $161, 160 3,600 $164,760 61,160 $103,600 34 Required: Use the Western Environmental Inc. information given below to prepare a statement of cash flows for the year ended June 30, 2020, using the indirect method. (List any deduction in cash and cash outflows as negative amounts.) a. A note is retired at carrying value. b. The only changes affecting retained earnings during 2020 are profit and cash dividends paid. c. New equipment is acquired during 2020 for $73,980. d. The profit on sale of equipment costing $61.980 during 2020 is $3,600. e. Prepaid expenses and wages expense affect other expenses on the income statement 1. All sales and purchases of merchandise were on credit. 02:48:04 eBook WESTERN ENVIRONMENTAL INC Statement of Cash Flows For Year Ended June 30, 2020 Cash flows from operating activities: Adjustments to reconcile profit to not cash provided by operating activities: Cash flows from investing activities: Cash flows from financing activities