An analysis of the income statement and the balance sheet accounts of Headrick, Inc., at December 31, 2011, provides the following information:

Income statement items:

Gain on Sale of Marketable Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,000

Loss on Sales of Plant Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000

Analysis of balance sheet accounts:

Marketable Securities account:

Debit entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000

Credit entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000

Notes Receivable account:

Debit entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000

Credit entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,000

Plant and Equipment accounts:

Debit entries to plant asset accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,000

Credit entries to plant asset accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000

Debit entries to accumulated depreciation accounts . . . . . . . . . . . . . . . . . . . . . 75,000

Additional Information

1. Except as noted in 4 below, payments and proceeds relating to investing transactions were made in cash.

2. The marketable securities are not cash equivalents.

3. All notes receivable relate to cash loans made to borrowers, not to receivables from customers.

4. Purchases of new equipment during the year ($196,000) were financed by paying $60,000 in cash and issuing a long-term note payable for $136,000.

5. Debits to the accumulated depreciation accounts are made whenever depreciable plant assets are retired. Thus, the book value of plant assets retired during the year was $45,000 ($120,000 -$75,000).

Instructions

a. Prepare the investing activities section of a statement of cash flows. Show supporting computations for the amounts of

(1) Proceeds from sales of marketable securities and

(2) Proceeds from sales of plant assets. Place brackets around numbers representing cash outflows.

b. Prepare the supporting schedule that should accompany the statement of cash flows in order to disclose the noncash aspects of the company’s investing and financing activities.

c. Assume that Headrick’s management expects approximately the same amount of cash to be used for investing activities next year. In general terms, explain how the company might generate cash for this purpose.