Read the scenario presented in Broaden Your Perspective (BYP) 12-6 on p. 641 in Ch. 12 of Financial Accounting.

Prepare the statement of cash flows using the indirect method. The only noncash items are depreciation and the gain on sale from investments.

Write a memo to shareholders explaining whether the organization had a performing or underperforming first year.

Discuss the reasons for your conclusion, referencing actual numbers from the statement of cash flows you developed.

DECISION MAKING ACROSS THE ORGANIZATION

BYP12-6 Ron Nord and Lisa Smith are examining the following statement of cash flows

for Carpino Company for the year ended January 31, 2007.

CARPINO COMPANY

Statement of Cash Flows

For the Year Ended January 31, 2007

Sources of cash

From sales of merchandise $380,000

From sale of capital stock 420,000

From sale of investment (purchased below) 80,000

From depreciation 55,000

From issuance of note for truck 20,000

From interest on investments 6,000

Total sources of cash 961,000

Statement of Cash Flows

Uses of cash

For purchase of fixtures and equipment 330,000

For merchandise purchased for resale 258,000

For operating expenses (including depreciation) 160,000

For purchase of investment 75,000

For purchase of truck by issuance of note 20,000

For purchase of treasury stock 10,000

For interest on note payable 3,000

Total uses of cash 856,000

Net increase in cash $ 105,000

Ron claims that Carpino