(L02,4) (SCF—Direct Method) Michaels Company had available at the end of 2017 the following information.

MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 2017 2016 Cash $ 10,000 $ 4,000 Accounts receivable 20,500 12,950 Short-term investments 22,000 30,000 Inventory 42,000 35,000 Prepaid rent 3,000 12,000 Prepaid insurance 2,100 900 Supplies 1,000 750 Land 125,000 175,000 Buildings 350,000 350,000 Accumulated depreciation—buildings (105,000) (87,500)
Equipment 525,000 400,000 Accumulated depreciation—equipment (130,000) (112,000)
Patents 45,000 50,000 Total assets $910,600 $871,100 Accounts payable $ 22,000 $ 32,000 Income taxes payable 5,000 4,000 Salaries and wages payable 5,000 3,000 Short-term notes payable 10,000 10,000 Long-term notes payable 60,000 70,000 Bonds payable 400,000 400,000 Premium on bonds payable 20,303 25,853 Common stock 240,000 220,000 Paid-in capital in excess of par—common stock 25,000 17,500 Retained earnings 123,297 88,747 Total liabilities and stockholders’ equity $910,600 $871,100 MICHAELS COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $1,160,000 Cost of goods sold 748,000 Gross margin 412,000 Operating expenses Selling expenses $ 79,200 Administrative expenses 156,700 Depreciation/Amortization expense 40,500 Total operating expenses 276,400 Income from operations 135,600 Other revenues/expenses Gain on sale of land 8,000 Gain on sale of short-term investment 4,000 Dividend revenue 2,400 Interest expense (51,750) (37,350)
Income before taxes 98,250 Income tax expense 39,400 Net income 58,850 Dividends to common stockholders (24,300)
To retained earnings $ 34,550 Instructions Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule.
Assume the short-term investments are debt securities, classified as available-for-sale.