Refer to the information presented for Milk River Ltd. in P17-11B. Further analysis reveals that accounts payable relate to purchases of merchandise inventory.

Instructions
Prepare a cash flow statement for the year using the direct method.
TAKING IT FURTHER
Explain why it is important to know if the company paid cash or financed the purchase of equipment and how this is shown on the cash flow statement.

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MILK RIVER LTD. Balance Sheet December 31 Assets Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Goodwil 2017 2016 $13,000 32,000 33,000 90,000 (30,000) 5,000 $143,000 $ 5,000 24,000 20,000 78,000 (24,000) 16,000 $119,000 Total assets Liabilities and Shareholders' Equit Accounts payable Income taxes payable Notes payable Common shares Retained earnings 18,000 2,000 42,000 18,000 63,000 $143,000 15,000 4,000 52,750 14,000 33,250 $119,000 Total liabilities and shareholders' equity MILK RIVER LTD. Income Statement Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Gain on sale of equipment Impairment loss on goodwill Profit from Other revenues and expenses $256,000 140,000 116,000 $64,000 (2,000) 11,000 73,000 43,000 operations Interest expense Profit before income tax Income tax expense Profit 4,000 39,000 9,250 29,750