Preparing and interpreting a statement of cash flows using a T-account work sheet. GTI, Inc. manufactures parts, components, and processing equipment for electronics and semiconductor applications in the communication, computer, automotive, and appliance industries. Its sales tend to vary with changes in the business cycle since the sales of most of its customers are cyclical. Exhibit 4.27 presents balance sheets for GTI as of December 31, Year 7 through Year 9, and Exhibit 4.28 presents income statements for Year 8 and Year 9.

a. Prepare a T-account work sheet for the preparation of a statement of cash flows for GTI, Inc. for Year 8 and Year 9. Notes to the firm's financial statements reveal the following (amounts in thousands):
(1) Depreciation expense was \(\$ 641\) in Year 8 and \(\$ 625\) in Year 9.
(2) Other Noncurrent Assets represent patents. Patent amortization was \(\$ 25\) in Year 8 and \(\$ 40\) in Year 9.
(3) Changes in Other Noncurrent Liabilities are operating transactions.

b. Prepare a statement of cash flows for GTI, Inc. for Year 8 and Year 9.

c. Discuss the relation between net income and cash flow from operations and the pattern of cash flows from operating, investing, and financing activities.

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EXHIBIT 4.27 ASSETS Cash Accounts Receivable Inventories Prepayments Total Current Assets GTI, INC. Balance Sheets (all dollar amounts in thousands) (Problem 29) Property, Plant, and Equipment (net) Other Noncurrent Assets Total Assets.. LIABILITIES AND SHAREHOLDERS' EQUITY December 31 Year 7 Year 8 Year 9 $ 430 $ 475 $ 367 3,768 3,936 2,545 2,334 2,966 2,094 116 270 122 $ 6,648 $ 7,647 $5,128 3,806 4,598 4,027 193 559 456 $10,647 $12,804 $9,611 Accounts Payable.. Notes Payable to Banks Other Current Liabilities Total Current Liabilities. Long-term Debt Other Noncurrent Liabilities Total Liabilities Preferred Stock Common Stock $ 1,578 $809 $ 796 11 231 2,413 1,076 777 695 $ 2,665 $ 1,817 $3,904 2,353 126 4,692 2,084 89 113 $6,101 $ 5,144 $ - 83 $ 6,598 $ 289 $ 289 3585 Additional Paid-in Capital Retained Earnings Total Shareholders' Equity Total Liabilities and Shareholders' Equity 4,385 4,392 4,395 1,035 1,440 (1,259) $ 5,503 $ 6,206 $3,510 $10,647 $12,804 $9,611