Preparing a statement of cash flows. (Adapted from CPA examination.) Roth Company has prepared its financial statements for the year ended December 31, Year 6, and for the three months ended March 31, Year 7. You have been asked to prepare a statement of cash flows for the three months ended March 31, Year 7. Exhibit 13.8 presents the company's balance sheet at December 31, Year 6, and March 31, Year 7, and Exhibit 13.9 presents its income statement for the three months ended March 31, Year 7. You are satisfied that the amounts presented are correct.

Your discussion with the company's controller and a review of the financial records reveal the following information:

(1) On January 8, Year 7, the company sold marketable securities for cash. The firm had purchased these securities on December 31, Year 6. The firm purchased no marketable securities during Year 7.

(2) The company's preferred stock is convertible into common stock at a rate of one share of preferred for two shares of common. The preferred stock and common stock have par values of \(\$ 2\) and \(\$ 1\), respectively.

(3) On January 17, Year 7, the local government condemned three acres of land. Roth Company received an award of \(\$ 48,000\) in cash on March 22, Year 7. It does not expect to purchase additional land as a replacement.

(4) On March 25, Year 7, the company purchased equipment for cash.

(5) Interest expense on bonds payable exceeded the cash coupon payments by \(\$ 225\) during the three-month period. On March 29, Year 7, the company issued bonds payable for cash.

(6) Roth Company declared \(\$ 12,000\) in dividends during the three months.

a. Prepare a T-account work sheet for the preparation of a statement of cash flows, defining funds as cash and cash equivalents.

b. Prepare a formal statement of cash flows for Roth Company for the three months ending March 31, Year 7.

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EXHIBIT 13.8 ROTH COMPANY Balance Sheer (Problem 111 Dec. 31, Year 6 Mar 31, Year 7 Cashi $ 37,950 $131,100 Merketable Securities 24,000 10,200 Accounts Receivable (net). 36,480 73.980 Stiventory 46,535 72.885 Total Current Assets $145,065 $288,165 Land.... 60,000 28,060 Building.. 375,000 375,000 Equipment 122.250 Accumulated Depreciation.. (22,500 (24,375) Investment in 30-percent-Owned Company (using equity method! 91,830 100,470 Other Assets 22,650 22.550 Total Assets Accounts Payable Didend Payable $872,045 $ 31,830 $912,210 $ 25,995 12,000 Income Taxes Payabie 51.924 Total Current Liab ties $ 31,830 $89.919 Other Liabilities 279,000 279.000 Bonds Payable 71,550 169.275 Deferred Income Tax 765 1,250 Preferred Stock... 45.000 Common Stock 120.000 185.000 Unrealized Holding Loss on Marketable Securities (750) (750) Retained Earrings. 124.630 208.497 Total Equities $872.045 $912.210