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

Additional data related to 2019 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, 2019, 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?