The Carpet Companys 20X2 and 20X3 balance sheets included t

The Carpet Company’s 20X2 and 20X3 balance sheets included the following items:December 3120102009DebitsCash$10,500$ 4,000Accounts receivable8,0009,000Merchandise inventory21,00018,000Equipment18,00015,000Totals$57,500$46,000CreditsAccumulated depreciation, equipment$4,000$3,000Accounts payable7,0005,000Taxes payable1,0002,000Dividends payable1,5000Common stock, $10 par value27,00025,000Contributed capital in excess of par, common stock6,0005,000Retained earnings11,0006,000Totals$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$40,000Wages and other operating expenses6,300Income taxes expense4,200Depreciation expense1,500 52,000Net income  9,000Additional 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, 20X3.Prepare the statement of cash flow under the indirect method for the year ended December 31, 20X3.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.


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