The income statement of L. James Company is preserved here L. James Company Income Statement For the Year linded November 30, 2022 57.700.000 Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Total cost of goods sold Gross profit Operating expenses Net income 51.000.000 4.400,000 6.300,000 1.400.000 4.900.000 2.800,000 1150 000 11000000 Additional information 1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000 2 Prepaid expenses increased $150.000 during the year. 3 Accounts payable to suppliers of merchandise decreased $340,000 during the year 4. Accrued expenses payable decreased $100.000 during the year. 5. Operating expenses include depreciation expense of $70,000. Instructions Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2022, for L. James Company, using the indirect method. L. James COMPANY Partial Statement of Cash Flows For the Year Ended November 30, 2022 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Increase in accounts receivable Decrease in inventory Increase in prepaid expenses Decrease in accounts payable Decrease in accrued expenses payable Net cash provided by operating activities 6 7 8 9 o P Y U 3 4 5 6 H J L 1 2 3 N M 2021 L. JAMES COMPANY Comparative Balance Sheet December 31 2022 Annet Cash $38.000 Accounts Receivable 30 000 Inventory 27.000 Equipment 60.000 Accumulated depreciation equipment 20,000 Total $120.000 $20.000 14,000 20.000 78.00 (24900 $10.00 Liabilities and stockholders' suity Accounts payable Income taxes payable Bonds payable Common sick Retained eamings Total $24,000 7.000 27,000 18.000 50,000 $120,000 $15,000 8.000 33,000 14.000 38.000 $100,000 L.JAMES COMPANY Income Statement For the Year ended December 31, 2022 Sales revenue Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income taxes Income tax expense Net Income $242,000 175,000 67.000 24.000 43,000 3,000 40,000 8.000 $32,000 Additional data 1. Dividends declared and paid were $20,000. 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. 14. All sales and purchases are on account. Instructions (@) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow, o P L 8 9 M 5 $ 2021 320,000 000 L. JAMES COMPANY Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Not income Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Increase in accounts receivable Increase in inventory increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities Cash flows from investing activities Sale of equipment Net cash provided by investing activities Cash flows from financing activities Issuance of common stock Redemption of bonds Payment of dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period Free Cash Flow Net cash provided by operating activities Less: Capital expenditures Cash dividends 11 L. James Company's income statement contained the condensed information below L. JAMES COMPANY Income Statement For the Year Ended December 31, 2022 Service revenue $70,000 Operating expenses, excluding depreciation $624,000 Depreciation expense 60.000 Loss on disposal of equipment 16.000 700.000 Income before Income taxes 270,000 Income tax expense 40,000 Net income 5230,000 L. James's balance sheet contained the comparative data at December 31, shown below 2022 2021 Accounts receivable $75,000 $65,000 Accounts payable 46.000 28.000 Income taxes payable 11,000 7,000 Accounts payablo pertain to operating expenses Instructions Prepare the operating activities section of the statement of cash flows using the indirect method L. JAMES COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Loss on disposal of equipment Increase in accounts receivable Increase in accounts payable Increase in income taxes payable Net cash provided by operating activities The income statement of L. James Company is preserved here L. James Company Income Statemem For the Year Ended November 30, 2022 57.700,000 Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Total cost of goods sold Gross profit Operating expenses Nat income 51.000.000 4.400.000 6,300,000 1.400.000 4.800.000 2.800,000 1150 000 650.000 Additional Information 1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000 2 Prepaid expenses increased $150.000 during the year. 13 Accounts payable to suppliers of merchandise decreased $340,000 during the year 14. Accrued expenses payable decreased $100.000 during the year. 5. Operating expenses include depreciation expense of $70,000. Instructions Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2022, for L. James Company, using the indirect method L. James COMPANY Partial Statement of Cash Flows For the Year Ended November 30, 2022 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Increase in accounts receivable Decrease in inventory Increase in prepaid expenses Decrease in accounts payable Decrease in accrued expenses payable Net cash provided by operating activities