Question no. 2 Presented on the next page are the financial statements of Pinball Company. PINBALL COMPANY Comparative Balance Sheets 2 Cash Flow Statement Principles of Financial Accounting - 1 December 31 2010 Assets 2009 Cash $ 35,000 $ 20,000 Accounts receivable 33,000 14,000 Merchandise inventory 27,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (29,000) (24,000) $108,000 Total $126,000 Liabilities and Stockholders' Equity Accounts payable $ 29,000 $ 15,000 Income taxes payable 7,000 8,000 Bonds payable 27,000 33,000 Common stock 18,000 14,000 Retained earnings 45,000 $126,000 38,000 $108,000 Total PINBALL COMPANY Income Statement For the Year Ended December 31, 2010 Sales $242,000 Cost of goods sold 175,000 Gross profit 67,000 Operating expenses 24,000 Income from operations 43,000 Interest expense 3,000 Income before income taxes Income tax expense 40,000 8,000 Net income $ 32,000 3 Cash Flow Statement Principles of Financial Accounting - Additional data: 1. Dividends declared and paid were $25,000. 2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale. 3. All depreciation expense, $14,500, is in the operating expenses. 4. All sales and purchases are on account. Instructions: Prepare a statement of cash flows using the indirect method