(L02,4) (Indirect SCF) Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information.

December 31 2017 2016 Cash $ 38,500 $13,000 Accounts receivable 12,250 10,000 Inventory 12,000 10,000 Equity investments –0– 3,000 Buildings –0– 29,750 Equipment 40,000 20,000 Copyrights 5,000 5,250 Totals $107,750 $91,000 Allowance for doubtful accounts $ 3,000 $ 4,500 Accumulated depreciation—equipment 2,000 4,500 Accumulated depreciation—buildings –0– 6,000 Accounts payable 5,000 4,000 Dividends payable –0– 5,000 Notes payable, short-term (nontrade) 3,000 4,000 Long-term notes payable 36,000 25,000 Common stock 38,000 33,000 Retained earnings 20,750 5,000

$107,750 $91,000 Additional data related to 2017 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 common stock.

3. Cash dividends paid were $5,000.

4. On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000

(net of $4,000 taxes).

5. Equity investments (ownership is less than 20% of total shares) were sold at $1,500 above their cost. No unrealized gains or losses were recorded in 2017.

6. Cash and 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 Dingel.

(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?