# Direct and Indirect Cash Flow Models, accounting homework help

Assignment Choice #1: Direct and Indirect Cash Flow Models

Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts a and b. Then paste the Excel data into a Word document on which you can also write the answer to part c.

<cash flows.xlsx>

Label each exercise or problem clearly. Use APA formatting and citation if needed.

The Carpet Company’s 20X2 and 20X3 balance sheets included the following items:

 December 31 20X3 20X2 Debits Cash \$10,500 \$ 4,000 Accounts receivable 8,000 9,000 Merchandise inventory 21,000 18,000 Equipment 18,000 15,000 Totals \$57,500 \$46,000 Credits Accumulated depreciation, equipment \$4,000 \$3,000 Accounts payable 7,000 5,000 Taxes payable 1,000 2,000 Dividends payable 1,500 0 Common stock, \$10 par value 27,000 25,000 Contributed capital in excess of par, common stock 6,000 5,000 Retained earnings 11,000 6,000 Totals \$57,500 \$46,000

The Carpet Company’s income statement was as follows:

 CARPET COMPANYIncome StatementFor the Year Ended December 31, 20X3 Sales \$61,000 Cost of goods sold \$40,000 Wages and other operating expenses 6,300 Income taxes expense 4,200 Depreciation expense 1,500 52,000 Net income 9,000

Additional information includes the following:

• Equipment costing \$3,500 was purchased during the year.
• Fully depreciated equipment that cost \$500 was discarded and its cost and accumulated depreciation were removed from the accounts.
• Two hundred shares of stock were sold and issued at \$15 per share.
• The company declared \$4,000 of cash dividends and paid \$2,500.

Required:

1. Prepare the statement of cash flow under the direct method for the year ended December 31, 20X3.
2. Prepare the statement of cash flow under the indirect method for the year ended December 31, 20X3.
3. Provide a statement between 200 and 300 words in length for senior management. The topic is the status of the company based on cash flow.