Greco Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following trial balance information.

Additional data related to 2022 are as follows.

1. Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.

2. $5,000 of the long-term note payable was paid by issuing ordinary shares.

3. Cash dividends paid were $5,000.

4. On January 1, 2022, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).

5. Equity investments (non-trading) were sold at $1,500 above their cost. The company has made similar sales and investments in the past.

6. Cash and a long-term note for $16,000 were given for the acquisition of equipment.

7. Interest of $2,000 and income taxes of $5,000 were paid in cash.

Instructions

a. Use the indirect method to analyze the above information and prepare a statement of cash flows for Greco.

b. What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:

1. A severely financially troubled firm?

2. A recently formed firm that is experiencing rapid growth?

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December 31 2022 2021 Cash $ 38,500 $13,00o Accounts receivable 12,250 10,000 Inventory 12,000 10,000 Equity investments (non-trading) -0- 3,000 Buildings -0- 29,750 Equipment Соруright 40,000 20,000 5,000 5,250 Totals $107,750 $91,o00 Allowance for doubtful accounts $ 3,000 $ 4,500 Accumulated depreciation-equipment 2,000 4,500 Accumulated depreciation-buildings 6,000 -0- Accounts payable Dividends payable 5,000 4,000 -0- 5,000 Notes payable, short-term (non-trade) 3,000 4,000 Long-term notes payable 36,000 25,000 Share capital-ordinary 38,000 33,0оо Retained earnings 20,750 5,000 $107,750 $ 91,000