The comparative balance sheets for Ramirez Company as of December 31 are presented below.

RAMIREZ COMPANY Comparative Balance Sheets December 31 Assets 2007 2006 Cash $ 71,000 $ 45,000 Accounts receivable 44,000 62,000 Inventory 151,450 142,000 Prepaid expenses 15,280 21,000 Land 105,000 130,000 Equipment 228,000 155,000 Accumulated depreciation—equipment (45,000) (35,000)

Building 200,000 200,000 Accumulated depreciation—building (60,000) (40,000)

Total $709,730 $680,000 Liabilities and Stockholders’ Equity Accounts payable $ 47,730 $ 40,000 Bonds payable 260,000 300,000 Common stock, $1 par 200,000 160,000 Retained earnings 202,000 180,000 Total $709,730 $680,000 Additional information: 1. Operating expenses include depreciation expense of $42,000 and charges from prepaid expenses of $5,720.

Land was sold for cash at book value.

Cash dividends of $15,000 were paid.

Net income for 2007 was $37,000.

Equipment was purchased for $95,000 cash. In addition, equipment costing $22,000 with a book value of $10,000 was sold for $6,000 cash. 6. Bonds were converted at face value by issuing 40,000 shares of $1 par value common stock.

eet Instructions Prepare a statement of cash flows for the year ended December 31, 2007, using the indirect method.

Problems: Set B 633