Sellmers Pasta, Inc., has the following financial statements: At the end of 2011, Sellmer purchased additional equipment

Sellmer’s Pasta, Inc., has the following financial statements:

At the end of 2011, Sellmer purchased additional equipment for $24,625. Sellmer paid dividends of $5,000 during the year.

Required
a. Prepare a statement of cash flows for 2011 using the direct method. Assume that advertising is paid in cash.
b. Prepare the operating activities section of the statement of cash flows for 2011 using the indirect method. Note that there is no difference between the two methods for the investing and financingsections.

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Sellmer's Pasta, Inc. Balance Sheets As of December 31,2010 and 2011 2010 2011 Assets Cash Accounts receivable Inventory Prepaid expenses Plant and equipment Accumulated depreciation $263,000 $280,900 120,500 83,800 199,080 80,325 (15,500 $701,800 $749,105 118,000 94,200 183,800 55,700 Total assets Liabilities and Equity Accounts payable Short-term notes payable Accrued wages Long-term notes payable Common stock Retained earnings $172,700 62,500 29,200 175,400 72,500 189,500 5701,800 $175,900 58,200 32,800 156,405 72,500 253,300 $749,105 Total liabilties and equity Sellmer's Pasta, Inc. Income Statement For the Year Ended December 31,2011 Sales Less: Cost of goods sold Gross margin Less operating expenses: $449,000 (173,000) 276,000 Wages and salaries expense Advertising expense Misc. operating expenses Depreciation expense $176,000 16,400 12,200 2,600 (207,200) 68,800 Net income (loss)