P4-46. Preparing a Statement of Cash Flows (Indirect Method) Wolff Company's income statement and comparative balance sheets follow. WOLFF COMPANY Income Statement Sales.. Cost of goods sold Wages expense Insurance expense Depreciation expense. Interest expense. Income tax expense Net income For Year Ended December 31, Year 5 $762,000 $516,000 103,200 9,600 20,400 10,800 34,800 694,800 $ 67,200 Assets Cash.. Accounts receivable Inventory.. Prepaid insurance. Plant assets Accumulated depreciation Total assets. . Liabilities and Stockholders' Equity Accounts payable.. WOLFF COMPANY Balance Sheets Dec. 31 Year 5 Dec. 31 Year 4 $ 13,200 49,200 108,000 $ 6,000 38,400 72,000 6,000 8,400 300,000 234,000 (81,600) (61,200) $394,800 $ 8,400 $297,600 $ 12,000 Wages payable. Income tax payable. Bonds payable Common stock. Retained earnings Total liabilities and equity 10,800 8,400 7,200 9,600 156,000 90,000 108,000 108,000 103,200 70,800 $394,800 $297,600 Cash dividends of $34,800 were declared and paid during Year 5. Also in Year 5, plant assets were purchased for cash, and bonds payable were issued for cash. Bond interest is paid semiannually on June 30 and December 31. Accounts payable relate to merchandise purchases. REQUIRED a. Compute the change in cash that occurred during Year 5. b. C. Prepare a Year 5 statement of cash flows using the indirect method. Compute and interpret Wolff's (1) operating cash flow to current liabilities ratio, and (2) operating cash flow to capital expenditures ratio. P4-47. Computing Cash Flow from Operating Activities (Direct Method) Refer to the income statement and comparative balance sheets for Wolff Company presented in P4-46. REQUIRED a. b. Compute Wolff Company's cash flow from operating activities using the direct method. Use the format illustrated in Exhibit 4.5 in the chapter. What can we learn from the direct method that may not be readily apparent when reviewing a statement of cash flows prepared using the indirect method