Mortonson Company has not yet prepared a statement of cash flows for the 2025 fiscal year. Comparative balance sheets as of December 31, 2024 and 2025, and a statement of income and retained earnings for the year ended December 31, 2025, are presented as follows.

Instructions

Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. Do not prepare a reconciliation schedule.

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Sales revenue Expenses Mortonson Company Statement of Income and Retained Earnings For the Year Ended December 31, 2025 ($000 omitted) Cost of goods sold Salaries and benefits Heat, light, and power Depreciation Property taxes Patent amortization Miscellaneous expenses Interest Income before income taxes Income taxes Net income Retained earnings-Jan. 1, 2025 Stock dividend declared and issued Retained earnings-Dec. 31, 2025 $1,200 725 75 80 19 25 10 30 $3,800 2,164 1,636 818 818 310 1,128 600 $ 528