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Question# 1 Computer services company gained market acceptance and shipments to customers have increased dramatically. The company is preparing for significant increases in production Management notes that despite increasing profits the cash balance has declined. You are hired to advise management as to specific causes of the cash deficiency and how to remedy the situation. You are given the following balance sheets of Computer service company for Years 2012 and 2011: Computer Services Company Balance Sheet 2012 2011 Assets Current Assets Cash ?!? 33,000 Accounts receivable 20,000 30.000 Inventory 15.000 10,000 Prepaid expenses 5,000 1,000 Property, plant and equipment Land 130,000 20.000 Building 160.000 40,000 Accumulated Depreciation (Building) (11,000) (5.000) Equipment 27.000 10,000 Accumulated Depreciation (equipment) (3.000) (1.000) Total Assets m $ 138,000 Liability and Stockholders Equity Current liabilities Accounts payable 28.000 12,000 Income taxes payable 6,000 8,000 Long-term liabilities Bonds payable 130.000 20.000 Stockholders' equity Common stock 70,000 50.000 Retained earnings 164.000 48,000 Total liabilities and stockholders' equity ??? S 138,000 Page 1 of 2 Computer Services Company Income Statement For the year ending Dec 31, 2012 Revenues 507.000 Cost of goods sold 150.000 Operating expenses 111,000 Depreciation expense 9,000 Loss on sale of equipment 3,000 Interest expense 42.000 315.000 EBT Income tax EAT 47.000 EAT In addition, the following information is available: 1) Depreciation expense was comprised of $6,000 for building and $3,000 for equipment. 2) The company sold equipment with a book value of $7.000 (cost $8,000. less accumulated depreciation $1,000) for $4,000 cash. 3) Issued $110,000 of long-term bonds in direct exchange for land. 4) A building costing $120,000 was purchased for cash. Equipment costing $25,000 was also purchased for cash. 5) Issued common stock for $20,000 cash. 6) The company declared and paid a $29,000 cash dividend. Required: Prepare a statement of cash flows (indirect method) for Year 2012

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