Forever Company showed the following statements for 2009.

Sales 3,850,000

Cost of sales2,270,000

Gross income1,580,000

Expenses:

Salaries 580,000

Depreciation 240,000

Other expenses 290,000

Bad debts written off 10,000 1,120,000

Net income460,000

Assets20092008

Cash and cash equivalents190,000130,000

Accounts receivable, net400,000380,000

Inventory840,000910,000

Prepaid Expenses50,00040,000

Property, plant and equipment2,550,0002,200,000

Accumulated depreciation(700,000)(600,000)

Goodwill360,000360,000

3,690,0003,420,000

Liabilities and equity

Accounts payable300,000240,000

Salaries payable70,000100,000

Note payable - bank --250,000

Share capital2,150,0001,950,000

Retained earnings1,170,000880,000

3,690,0003,420,000

Additional information

1.A cash dividend of 170,000 was declared and paid during the year.

2.Equipment of 200,000 with accumulated depreciation of 140,000 was sold for cash at no gain or loss.

3.The net change in the equipment after considering the equipment sold was the result of a cash acquisition.

4.The note payable - bank matured this year and was accordingly paid in cash.

5.The share capital was issued for cash.

Required:

a.Prepare statement of cash flows for the year ended December 31, 2009 using the direct method.

b.Compute the cash flow from operating activities using the indirect method.

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