Directions

-Prepare a statement of cash flows using the indirect method.

-In the first question, you prepared a SOCF using the indirect method. GAAP also allows the use of the direct method to calculate the SOCF. Detail the differences between the two methods and explain what method is most commonly used in business.

-Discuss what method you prefer and why (indirect or direct).

Make sure to show your work and provide a description. Please make sure to cite them appropriately for my review.

Start by reviewing the Comparative Balance Sheet, the Income Statement, and the additional data below.

Comparative Balance Sheet: December 31

Comparative Balance Sheet

Assets	2020	2019
Cash	$38,000	$20,000
Accounts Receivable	$33,000	$14,000
Inventory	$27,000	$20,000
PP&E	$60,000	$78,000
Accum Depn	($32,000)	($24,000)
Total	$126,000.00	$108,000.00
Liabilities and Stockholders' Equity
Accounts Payable	$24,000	$15,000
Income Taxes Payable	$7,000	$8,000
Bonds Payable	$27,000	$33,000
Common Stock	$18,000	$14,000
Retailed Earnings	$50,000	$38,000
Total	$126,000	$108,000

Income Statement: For The Year Ended December 31, 2020

Income Statement

Sales		242,000
COGS		175,00
Gross Profit		67,000
Selling Expense	18,000
Administrative Expenses	6,000	24,000
Income From Operations		43,000
Interest Expense		3,000
Income Before Income Taxes		40,000
Income Tax Expense		8,000
Net Income		32,000

Additional Data

Dividends declared and paid were $20,000.

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.

All depreciation expense is in the selling expense category.

All sales and purchases are on account.

Directions

Prepare a statement of cash flows using the indirect method.

In the first question, you prepared a SOCF using the indirect method. GAAP also allows the use of the direct method to calculate the SOCF. Detail the differences between the two methods and explain what method is most commonly used in business.

Discuss what method you prefer and why (indirect or direct).

Make sure to show your work and provide a description. If sources are quoted and utilized in your paper, make sure to cite appropriately.