Problem 3.Prepare a statement of cash flows--indirect methodPresented below are the financial statements of Warner Company.WARNER COMPANYComparative Balance SheetDecember 31Assets20222023Cash$35,000$20,000(6,000)(8,000)Accounts receivable20,00014,000Inventory28,00020,000Property, plant, and equipment60,00078,000Accumulated depreciation(32,000)(24,000)Total$111,000$108,000Liabilities and Stockholders' EguityAccounts payable$19,000$15,000(4,000)Income taxes payable7,0008,0001,000Bonds payable17,00033,000Common stock18,00014,000Retained earnings50,00038,000Total$111,000$108,000WARNER COMPANYIncome StatementFor the Year Ended December 31, 2022Sales Revenue$242,000Cost of goods sold175,000Gross profit67,000Selling expenses$18,000Administrative expenses6,00024,000Income from operations43,000Interest expense3,000Income before income taxes40,000Income tax expense8,000Net income$32,000Additional data:1. Depreciation expense was $17,500.2.Dividends declared and paid were $20,000. (a)Prepare a statement of cash flows using the indirect method.Cash from operating activitiesNet incomeAdjustments to reconcile net income provided byoperating activities:32,000Depreciation expenseDecrease in Accounts receivableDecrease in InventoryDecrease in Accounts PayableIncrease in income taxes payableNet cash provided by operating activities17,5006,0008,000(4,000)1,00028,50060,500Cash flow from investing activitiesSale of equipmentNet cash used by investing activities8,5008,500Cash flow from financing activitiesSale of Common StockPayment of DividendsNet cash provided/used by Financing ActivitiesNet decrease in cashCash at beginning periodCash at the end of period15,00035,00020,000b)Compute free cash flow.

Cash flows statement is one of the financial statement of the business which shows all cash inflows…

Answered: b) Compute free cash flow.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter4: Accounting For Retail Operations

Section: Chapter Questions

Problem 4.6.1P

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