Financial statement data for Bankhead, Inc., are provided. (All numbers are shown rounded to the nearest thousand, with 000's omitted.)

Required:
1. Compute the net cash flows from operations using the direct method.
2. Interpretive Question: Comment on the difference between net income and net cash flows from operations.
3. Prepare a statement of cash flows for Bankhead for the year ended December 31,2012.

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Bankhead, Inc. Income and Retained Earnings Statements For the Year Ended December 31, 2012 Sales revenue Cost of goods sold. Gross margin. Operating expenses: Sales and administrative expenses. Depreciation expense Other expenses Total operating expenses. Income before taxes. $1.450 1,030 $ 420 S 110 17 81 $ 208 $ 212 Income taxes. 53 Net income Dividends paid Increase in retained earnings. $ 159 25 Ş 134 Bankhead, Inc. Comparative Balance Sheets December 31, 2012 and 2011 2012 2011 Assets S 783 Cash and cash equivalents Accounts receivable (net $ 612 448 456 Inventory Land. Store fixtures Accumulated depreciation, store fixtures Total assets. 245 980 1,450 255 (72) $3,117 1,300 255 (55) $3,540 Liabilities and Stockholders' Equity Liabilites: $ 170 574 Accounts payable Shortterm notes payable Long-term debt. . Total liabilities Stockholders' equity: Common stock. Paidin capital in excess of par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 366 735 1,024 $2,125 824 $1,568 $ 145 S 145 550 550 854 720 S1,549 $3,117 $1.415 S3,540