Operating Cash Flows. Data from the beginning and ending balance sheets for Donaldson Machine Company are as follows:

The income statement for the year shows net sales of \(\$ 620,000\), cost of goods sold of \(\$ 385,000\), and operating expenses of \(\$ 112,000\). Included in operating expenses is depreciation of \(\$ 14,000\). Also, a gain of \(\$ 8,000\) is reported from the sale of equipment. Equipment costing \(\$ 248,000\) was acquired, and equipment sold had a net book value of \(\$ 23,000\) at the date of sale. The company sold its common stock for \(\$ 60,000\).
\section*{Required:}
1. Prepare a statement of cash flows using the direct method.
2. Does this explain the change in cash? Comment.

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Ending Beginning Cash $ 27,000 $ 23,000 Accounts payable Ending $23,000 Beginning $ 29,000 Accounts receivable Inventory 54,000 46,000 48,000 Accrued expenses 18,000 7,000 71,000 Current liabilities $41,000 $ 36,000 Current assets $127,000 $142,000