1. Net Cash Prov. by Op. Act. $132,700

The 2016 income statement and comparative balance sheet of McKnight, Inc. follow:

MCKNIGHT, INC

INCOME STATEMENT

YEAR ENDEN DECEMBER 31,2016

Sales revenue		$441,000
Cost of goods sold		202,200
Gross profit		238,800
Operating expenses:
Salaries expense	$76,400
Depreciation expense- plant assets	14,200
Other operating expenses	10,500
Total operating expenses		101,100
Operating income		137,700
Other revenues and (expenses)
Interest revenue	8,800
Interest expense	(21,600)
Total other revenues and (expenses)		(12,800)
Net income before income taxes		124,900
Income tax expense		19,500
Net income		$105,400

MCKNIGHT, INC.

Comparative Balance Sheet

December 31,2016 and 2015

	2016	2015
Assets
Current assets:
Cash	$26,000	$15,100
Accounts receivable	26,700	25,200
Merchandise inventory	79,700	91,600
Long-term assets:
Plant assets	118,510	110,310
Accumulated depreciation- plant assets	(19,610)	(15,610)
Land	34,800	7,000
Total assets	$266,500	$233,600
Liabilities
Current liabilities
Accounts payable	$35,100	$30,500
Accrued liabilities	28,200	30,100
Long-term liabilities:
Notes payable	73,000	106,000
Total liabilities	136,300	166,600
Stockholders Equity
Common stock, no par	88,100	64,700
Retained earnings	42,100	2,300
Total stockholders equity	130,200	67,000
Total liabilities and stockholders equity	$266,500	$233,600

Additionally, McKnight purchased land of $27,800 by financing it 100% with long-term notes payable during 2016. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for $0. The cost and the accumulated depreciation of the disposed asset was $10,200. The plant acquisition was for cash.

Requirements

1. Prepare the 2016 statement of cash flows, formatting operating activities by the direct method.
2. Prepare the operating activities section also by the indirect method.
3. How will what you learned in this problem help you evaluate an investment?