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Below Income statement and Balance sheet has given: PREPARE A STATEMENT OF CASH FLOWS (INDIRECT METHOD)

Income Statement

Year Ended December 31, 2005

Sales revenue $662,000

Cost of goods sold 560,000

Gross profit 102,000

Operating expenses:

Salary expense $46,000

Depreciation expense 10,000

Rent expense 2,000

Total operating expenses 58,000

Income from operations 44,000

Other Items:

Loss on sale of equipment (2,000)

Income before income tax 42,000

Income tax expense 16,000

Net income $26,000

Balance Sheet

December 31, 2005 and 2004

Assets 2005 2004

Current:

Cash and equivalents $ 22,000 $ 3,000

Accounts receivable 22,000 23,000

Inventories 35,000 34,000

Total current assets 79,000 60,000

Equipment, net 126,000 72,000

Total assets $205,000 $132,000

Liabilities 2005 2004

Current:

Accounts payable 35,000 26,000

Accrued liabilities 7,000 9,000

Income tax payable 10,000 10,000

Total current liabilities 52,000 45,000

Bonds payable 84,000 53,000

Owners Equity 2005 2004

Common stock 52,000 20,000

Retained earnings 27,000 19,000

Less: Treasury stock (10,000) (5,000)

Total liabilities and equity $205,000 $132,000

Transaction data for 2005:

Purchase of equipment $140,000

Payment of dividends 18,000

Issuance of common stock to retire bonds payable 13,000

Issuance of bonds payable to borrow cash 44,000

Issuance of common stock 19,000

Sale of equipment (book value, $76,000) 74,000

Purchase of treasury stock 5,000

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