Preparing statement of cash flows. (Adapted from a problem by S. Baiman.) (Requires coverage of Appendix 8.1.) Exhibit 8.5 shows comparative balance sheets, an income statement for Year 2, and supplementary notes of Ormes Company.

Prepare the Year 2 statement of cash flows, with funds defined as cash.

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Balance Sheets Cash. Accounts Receivable Less Allowance for Uncollectibles Inventory... Property, Plant, and Equipment Accumulated Depreciation Patents Accumulated Amortization Total Assets Accounts Payable Common Stock Retained Earnings Total Equities Year 2 Income Statement Net Sales Gain on Sale of Patent Cost of Goods Sold Selling and Administrative Expense Bad Debt Expense Depreciation Expense Amortization Expense Loss on Sale of Equipment Income Tax Expense Total Expenses Net Income Year 1 December 31 Year 2 $ 25,700 $ 31,500 120,000 130,000 (2,400) (3,200) 175,000 200,000 247,300 300,200 (78,000) (95,000) 75,000 (15,000) $ 623,500 $487,600 $155,000 $ 182,000 100,000 232,600 173,900 267,600 $487,600 $ 623,500 $1,000,000 125,000 $1,125,000 $ 750,000 203,000 20,000 39,000 15,000 8,000 30,000 $1,065,000 $ 60,000