Solved by verified expert :The Carpet Company’s 2009 and 2010 balance sheets included the following items:December 312010 2009Debits Cash………………………………………………………………………………… $10,500 $ 4,000Accounts receivable……………………………………………………………….. 8,000 9,000Merchandise inventory……………………….. …………………………………. 21,000 18,000Equipment……………………………………………………………………………. 18,000 15,000Totals………………………………………………………………………… $57,500 $46,000Credits Accumulated depreciation, equipment………………………………………. $ 4,000 $ 3,000Accounts payable…………………………………………………………………… 7,000 5,000Taxes payable……………………………………………………………………….. 1,000 2,000Dividends payable………………………………………………………………….. 1,500 0Common stock, $10 par value…………………………………………………… 27,000 25,000Contributed capital in excess of par, common stock………………………. 6,000 5,000Retained earnings………………………………………………………………….. 11,000 6,000Totals………………………………………………………………………… $57,500 $46,000The Carpet Company’s income statement was as follows:CARPET COMPANYIncome StatementFor the Year Ended December 31, 2010Sales………………………………………………………………………………… $61,000Cost of goods sold………………………………………………………………….. $40,000 Wages and other operating expenses………………………………………… 6,300 Income taxes expense……………………………………………………………. 4,200 Depreciation expense…………………………………………………………….. 1,500 52,000Net income…………………………………………………………………………… $ 9,000Required: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:Prepare the statement of cash flow under the direct method for the year ended December 31, 2010.Prepare the statement of cash flow under the indirect method for the year ended December 31, 2010.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.
