Using the information provided in E22-12, prepare the statement of cash flows for Ferragosto Services, Ltd. under the indirect method. Use income before interest and taxes as the starting point. Assume interest expense and dividends paid are financing activities. Assume taxes are an operating activity.

In E22-12

Ferragosto Services, Ltd. provided the following comparative balance sheets and income statement for the current year.

                            Ferragosto Services, Ltd.

                                Income Statement

                    For the Year Ended December, 31

                                      Current Year

Service Revenue………………………………………..        $ 707,475

Selling, General, and Administrative Expenses………...        (280,100)

Depreciation Expense…………………………………...       (75,900)

Bad Debt Expense………………………………………      (20,000)

Income before Interest and Taxes……………………….      $ 331,475

Interest Expense…………………………………………     (25,000)

Income before Tax……………………………………….      $ 306,475

Tax at 40%.........................................................................     (122,590)

Net Income………………………………………………     $ 183,885

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Ferragosto Services, Ltd. Balance Sheets At December 31 Assets Current Year Prior Year Current Assets Cash Accounts Receivable-net Supplies Inventory Prepaid Expenses S 317400 93,150 265,305 603,750 23,460 $1,462,750 985,665 312,225 807250 25,875 Total Current Assets Noncurrent Assets Investments- Held to Maturity Land Property, Plant, and Equipment Accumulated Depreciation s 69,000 120,750 207000 941,800 (44,850 $1 259,250 1,124,700 S2,722,000 $2,110.365 320,850 990,150 Total Noncurrent Assets Total Assets Liabilities Current Liabilities Accrued Liabilities Accounts Payable s 310,500 393,300 S 703,800 S 289,900 217350 507150 Total Current Liabilities Noncurrent Liabilities Notes Payable S 531250 207000 S 531,250 207000 $1,235,050 714,150 Total Noncurrent Liabilities Total Liabilities Shareholders Equity Common Stock, no par value Retained Eanings S 345,000 345,000 1.193,700 1078,815 $1.538,700 $1,423,815 Total Shareholders' Equity Less: Treasury Stock at Cost Total Liabilities and Shareholdars' Equity 51750 $2,722,000 $2,110,365