Refer to the information presented for Diatessaron Inc. in P17-11A.

Additional information:
1. All purchases of inventory are on credit.
2. Accounts payable is used only to record purchases of inventory.
Instructions
Prepare a cash flow statement for the year using the direct method.
TAKING IT FURTHER Why is it necessary to know that Accounts Payable is used for purchases of inventory when using the direct method, but not the indirect method?

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DIATESSARON INC. Balance Sheet December 31 2014 2013 Assets Cash Accounts receivable Inventory Long-term debt investment Property, plant, and equipment Less: Accumulated depreciation 67,000 01,000 205,000 101,500 535,000 (162,500) $847,000 $98,000 75,000 155,500 0 460,000 (140,000) $648,500 Liabilities and Shareholders' Equit Accounts payable Dividends payable Income tax payable Long-term notes payable Common shares Retained earnings $57,500 6,000 14,000 25,000 630,000 114,500 $847,000 47,000 0 15,000 0 525,000 61,500 $648,500 DIATESSARON INC. Income Statement Year Ended December 31, 2014 $663,000 432,000 231,000 Sales Cost of goods sold Gross profit Operating expenses Loss on sale of equipment Profit from operations Interest expense Interest revenue Profit before income tax Income tax expense $147,500 3,000 150,500 3,000 (4,500) (1,500) 82,000 14,000 68,000