Question

Using the financial information from the past two years (2020 and 2019) provided, where Sally's sunglasses collection policy is 30 days and the benchmark for inventory is 35 days, and leveraging a spreadsheet application like Microsoft Excel, utilize the indirect method to prepare a statement of cash flows for the current year.

Answer 1

To prepare a statement of cash flows using the indirect method, adjustments for non-cash transactions and changes in working capital are made to the net income. Sally's 30-day collection policy and the 35-day inventory benchmark would be considered in the working capital adjustments.

Step-by-step explanation:

To prepare a statement of cash flows using the indirect method, you must begin with the net income and make adjustments for non-cash transactions and changes in working capital. Given Sally's collection policy of 30 days and the inventory benchmark of 35 days, these figures will affect the accounts receivable and inventory sections of the working capital calculations.

Regarding the future value calculations provided, these are not directly relevant to the preparation of the statement of cash flows. However, to respond accurately to that part of the question, the future value formula is typically used to calculate the worth of payments or cash flows received in the future. If we apply this to your scenario, payments that the firm is going to receive, such as $15 million at present, $20 million in one year, and $25 million in two years, would be adjusted based on a given interest rate to find their future values.