BTB Electronics Inc. manufactures parts, components, and processing equipment for electronics and semiconductor applications in the communications, computer, automotive, and appliance industries. Its sales tend to vary with changes in the business cycle because the sales of most of its customers are cyclical. Exhibit 3.32 presents balance sheets for BTB as of December 31, Year 7 through Year 9, and Exhibit 3.33 presents income statements for Year 8 and Year 9.

Required
a. Prepare a worksheet for the preparation of a statement of cash flows for BTB Electronics Inc. for Years 8 and 9. Follow the format of Exhibit 3.14 in the text. Notes to the firm's financial statements reveal the following (amounts in thousands):
(1) Depreciation expense was $641 in Year 8 and $625 in Year 9. No fixed assets were sold during these years.
(2) Other Assets represents patents. Patent amortization was $25 in Year 8 and $40 in Year 9. BTB sold a patent during Year 9 at no gain or loss.
(3) Changes in Deferred Income Taxes are operating activities.
b. Discuss the relations among net income and cash flow from operations and the pattern of cash flows from operating, investing, and financing activities?

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Exhibit 3.32 BTB Electronics Inc Balance Sheets amounts in thousands) Problem 3.27) December 31 Year 9 Year 8 Year 7 ASSETS Cash Accounts receivable Inventories Prepayments S 367 2,545 2,094 122 5,128 4,027 456 9,611 475 3,936 2,966 270 7,647 4,598 559 $12,804 $ 430 3,768 2,334 116 6,648 3,806 193 $10,647 Total Current Assets Property, plant, and equipment, net Other assets Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable Notes payable to banks Other current liabilities $ 796 2,413 695 3,904 2,084 113 6,101 $ 289 85 4,395 1,259) 3,510 9,611 $ 809 231 1,578 Total Current Liabilities Long-term debt Deferred income taxes 1,076 2,665 2,353 126 5,144 $ 1,817 4,692 89 6,598 $ 289 85 4,392 1,440 6,206 $12,804 Total Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings 83 4,385 1,035 5,503 $10,647 Total Shareholders' Equity Total Liabilities and Shareholders' Equity