Case 1. The 2010 comparative Income Statement and the 2010 comparative Balance Sheet of...

Case 1. The 2010 comparative Income Statement and the 2010 comparative Balance Sheet of Golf America, Inc., have just been distributed at a meeting of the company’s board of directors. The members of the board of directors raise a fundamental question: Why is the cash balance so low? This question is especially hard to understand because 2010 showed record profits. As the controller of the company, you must answer the question.

Requirements

1. Prepare a Statement of Cash Flows for 2010 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or long-term investments and issued no notes payable during 2010. There were no noncash investing and financing transactions during the year. Show all amounts in thousands

2. Considering net income and the company’s cash flows during 2010, was it a good year or a bad year? Give your reasons.