Use the Following Financial Statements and Additional Information to (1)

question 37

Essay

Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, 20X2 using the indirect method, and (2) compute the company's cash flow on total assets ratio for 20X2.
Derby Company Income Statement
For Year Ended December 31, 20X2

$$\begin{array} { | l | l | l } \hline \text { Sales } & & \$ 488,000 \\\hline \text { Cost of goods sold } & \$ 212,540 & \\\hline \text { Depreciation expense } & 43,000 & \\\hline \text { Other operating expenses } & 106,260 & \\\hline \text { Interest expense } & 6,400 & (3 6 8 , 2 0 0 \\\hline \text { Other gains (losses): } & & \\\hline \text { Gain on sale of equipment } & & 4,700 \\\hline \text { Income before taxes } & & 124,500 \\\hline \text { Income taxes expense } & & 41,100 \\\hline \text { Net income } & & \$ \\& & 8 3 , 4 0 0 \\\hline & &\end{array}$$ Additional Information
a. A $20,000 note payable is retired at its carrying value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $120,000 cash.
d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.
e. Prepaid expenses relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.

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