Exercise #2
Ozark Corporation reported net income of $100,000 for 20X5. The income statement revealed sales of
$1,000,000; gross profit of $520,000; selling and administrative costs of $340,000; interest expense of
$20,000; and income taxes of $60,000.
The selling and administrative expenses included $25,000 for depreciation. No equipment was sold
during the year. Equipment purchases were made with cash. Prepaid insurance included in the balance
sheet related to administrative costs. All accounts payable included in the balance sheet relate to
inventory purchases. The change in retained earnings is attributable to net income and dividends. The
increase in common stock and additional paid-in capital is due to issuing additional shares for cash.

Using the indirect approach, prepare a statement of cash flows for Ozark for the year ending December 31, 20X5
OZARK CORPORATION
Balance Sheet
December 31, 20X4 and 20X5

Assets
20X5
Cash
458,700
Accounts receivable 199,250
Inventories
248,600
Prepaid insurance
13,000
Land
250,000
Building and equipme
###
Less: Accumulated dep(205,000)
Total assets
###

20X4 Change
471,450 (12,750)
171,500
278,800
11,000
250,000
###
(180,000)
###

Liabilities
Accounts payable
85,700
93,400
Interest payable
10,500
15,000
Income taxes payable 22,000
8,000
Stockholders’ equity
Common stock
710,000 700,000
Paid in capital in exce 990,000 900,000
Retained earnings
646,350 586,350
Total liabilities and eq
###
###

revealed sales of
rest expense of

ment was sold
ed in the balance
et relate to
d dividends. The
ares for cash.

nding December 31, 20X5. Comparative balance sheets for Ozark follow.

OZARK CORPORATION
Statement of Cash Flows (Indirect Approach)
For the Year Ending December 31, 20X5
Cash flows from o
Net income
###
Add (deduct) noncash effects on operating income
Deprec
###
Increa 27,750
Decrea 30,200
Increa
2,000
Decrea 7,700
Decrea 4,500
Increa 14,000
Net cash pr $
Cash flows from i
Purchase
###
Net cash us

###

Cash flows from f
Proceeds
###
Dividend
Net cash pr 10,000
Net decrease in
$
Cash balance at
Cash balance at
$