On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities.

Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000.

Year Year
2011 2010
Cash $65,000 $ 54,000
Accounts receivable (net) 78,000 85,000
Inventories 106,500 90,000
Land -- 20,000
Equipment 495,000 370,000
Accumulated depreciation (215,000) (158,000)
$529,500 $461,000

Accounts payable (merchandise creditors) $ 53,500 $ 55,000
Common stock, $10 par 200,000 170,000
Paid-in capital in excess of par--
common stock 62,000 60,000
Retained earnings 214,000 176,000
$529,500 $461,000