The income statement for the year ended December 31, 2008 as well as the balance sheets as of December 31, 2008 and December 31, 2007 for Lucky Lady, Inc. follow. This information is taken from the financial statements of a real company whose name has been disguised.

Additional Information and Author Notes:
• Aircraft valuation adjustment: The company reduced the book value of its aircraft and related equipment to their expected recoverable values and recognized an aircraft carrying value adjustment in the 2008 income statement. [Author Note: You may treat this item as “extra” depreciation recorded during the year due to abnormal decline in the asset value. ]
• Property, plant and equipment: Includes land, buildings, aircraft equipment, furniture and fixture, equipment under capital lease, and so on. During 2008, the company acquired equipment under capital leases for \($16,987,000\). The company also sold equipment with a net book value of \($2,501,000\) for \($684,000\) cash. [Author Note: The gain or loss on this sale is combined with some other item in the income statement. Any other change in the gross book value of Property, plant and equipment may be attributed to outright purchase of other equipment and building construction costs. ]
• Capital lease and long-term liabilities: [Author Note: When preparing the cash flow statement, you may find it convenient to combine the current and long-term portions of each of these liabilities. ]
• Pre-opening expenses: Pre-opening expenses include direct project salaries, advertising, and other pre-opening services incurred during the pre-opening period of the Lucky Lady Hotel. Such expenses were expensed upon opening the facility.
• Stock offering: The increases in Common stock and Capital in excess of par accounts are due to a common stock offering completed on August 17, 2008.
• Laundry loan: On June 16, 2008, the company obtained a \($10,000,000\) loan from a financial institution for a laundry facility in North Las Vegas, Nevada. As of December 31, 2008, \($10,000,000\) has been drawn down under the loan. Construction of the facility was completed in December 2008. The laundry provides the laundry and dry cleaning services for the Lucky Lady Hotel.
Required:
1. Using the indirect method, prepare the statement of cash flows for the year ended December 31, 2008 in as much detail as possible. For example, borrowing and repayment, if any, should be shown separately as financing inflow and outflow, respectively. Similarly, to the extent that information is available, separately disclose and explain the changes to each asset and each liability account that affected Lucky Lady’s cash flows during 2008.
2. Redo the operating section of the cash flow statement using the direct method.

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Income Statement ($ in thousands) Revenues Casino Rooms Food and beverage Other hotel/casino Airline Total revenues Operating Expenses Casino Rooms For the Year Ended December 31, 2008 $ 26,702 2,897 2,351 5,066 20,784 57,800 9,341 1,016 Food and beverage 2,529 Other hotel/casino 5,777 Airline 20,599 Selling, general, and administrative (including bad debt expense of $3,855) 19,679 Depreciation expense 8,018 Hotel preopening expenses 45,130 Aircraft carrying value adjustment 68,948 Total operating expenses 181,037 Operating income (123,237) Nonoperating items: Interest income Interest expense Other, net Income before taxes Provision for income taxes. Net income (loss) 12,231 (6,596) 16 (117,586) -0- $(117,586)