A comparative balance sheet and income statement for Eaton Company follow:

Eaton Company Comparative Balance Sheet December 31, 2011 and 2010
	2011		2010
Assets
Cash	$	3	$	18
Accounts receivable		410		280
Inventory		145		190
Prepaid expenses		6		4
Total current assets		564		492
Property, plant, and equipment		590		480
Less accumulated depreciation		100		90
Net property, plant, and equipment		490		390
Long-term investments		18		38
Total assets	$	1,072	$	920
Liabilities and Stockholders' Equity
Accounts payable	$	300	$	240
Accrued liabilities		60		70
Income taxes payable		75		68
Total current liabilities		435		378
Bonds payable		275		180
Total liabilities		710		558
Common stock		222		300
Retained earnings		140		62
Total stockholders equity		362		362
Total liabilities and stockholders' equity	$	1,072	$	920

Eaton Company Income Statement For the Year Ended December 31, 2011
Sales			$	780
Cost of goods sold				440
Gross margin				340
Selling and administrative expenses				209
Net operating income				131
Nonoperating items:
Gain on sale of investments	$	10
Loss on sale of equipment		(1)		9
Income before taxes				140
Income taxes				42
Net income			$	98

During 2011, Eaton sold some equipment for $18 that had cost $39 and on which there was accumulated depreciation of $20. In addition, the company sold long-term investments for $30 that had cost $20 when purchased several years ago. A cash dividend was paid during 2011 and the company, repurchased $78 of its own stock. Eaton did not retire any bonds during 2011.

Required:
1.	Using the direct method, adjust the companys income statement for 2011 to a cash basis. (Adjustment amounts that are to be deducted and Net cash "used in" operating activities should be indicated with a minus sign and all other amounts as positive values.)

Eaton Company Direct Method of Determining the Net Cash flows from Operating activities For the Year Ended December 31, 2011
Sales	$
Adjustments to a cash basis:
(Click to select)Decrease in accrued liabilitiesIncrease in income taxes payableIncrease in accrued liabilitiesDecrease in accounts receivableDecrease in inventoryIncrease in prepaid expensesIncrease in inventoryDecrease in prepaid expensesDepreciationDecrease in income taxes payableIncrease in accounts payableDecrease in accounts payableLoss on sale of equipmentGain on sale of investmentsIncrease in accounts receivable		$
Cost of goods sold
Adjustments to a cash basis:
(Click to select)Increase in prepaid expensesIncrease in accounts payableIncrease in income taxes payableDecrease in accounts payableDecrease in inventoryIncrease in accounts receivableDecrease in accrued liabilitiesDepreciationDecrease in accounts receivableDecrease in income taxes payableIncrease in accrued liabilitiesIncrease in inventoryGain on sale of investmentsDecrease in prepaid expensesLoss on sale of equipment
(Click to select)Loss on sale of equipmentIncrease in accrued liabilitiesIncrease in accounts receivableDecrease in inventoryDecrease in accounts receivableGain on sale of investmentsIncrease in inventoryIncrease in prepaid expensesIncrease in income taxes payableDecrease in accrued liabilitiesDecrease in income taxes payableDepreciationIncrease in accounts payableDecrease in prepaid expensesDecrease in accounts payable
Selling and administrative expenses
Adjustments to a cash basis:
(Click to select)Decrease in accounts payableLoss on sale of equipmentGain on sale of investmentsDepreciationIncrease in prepaid expensesDecrease in accrued liabilitiesIncrease in accrued liabilitiesDecrease in prepaid expensesDecrease in income taxes payableIncrease in income taxes payableDecrease in accounts receivableIncrease in accounts payableDecrease in inventoryIncrease in accounts receivable
(Click to select)Decrease in accrued liabilitiesIncrease in prepaid expensesIncrease in accounts payableIncrease in accrued liabilitiesDecrease in inventoryGain on sale of investmentsIncrease in income taxes payableLoss on sale of equipmentDecrease in income taxes payableDecrease in prepaid expensesIncrease in accounts receivableDecrease in accounts receivableDepreciationDecrease in accounts payable
(Click to select)Decrease in inventoryDecrease in accrued liabilitiesDecrease in income taxes payableIncrease in prepaid expensesDecrease in prepaid expensesIncrease in accrued liabilitiesDepreciationDecrease in accounts payableIncrease in accounts payableGain on sale of investmentsDecrease in accounts receivableLoss on sale of equipmentIncrease in accounts receivableIncrease in income taxes payable
Income taxes
Adjustments to a cash basis:
(Click to select)Loss on sale of equipmentDecrease in inventoryDecrease in income taxes payableIncrease in accrued liabilitiesDecrease in accounts payableIncrease in accounts payableDecrease in prepaid expensesIncrease in prepaid expensesIncrease in inventoryIncrease in income taxes payableDepreciationGain on sale of investmentsIncrease in accounts receivableDecrease in accounts receivableDecrease in accrued liabilities
Net cash (Click to select)used forprovided by operating activities		$

2.	Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Cash outflows and amounts to be deducted should be indicated with a minus sign.)

Eaton Company Statement of Cash Flows For the Year Ended December 31, 2011
Operating activities:
Cash received from customers		$
Less cash disbursements for:
(Click to select)Cash paid for merchandise purchasedIncrease in common stockIncome taxesIncrease in accounts payableCash dividendsSelling and administrative expensesIncrease in inventoryIssuance of bonds payableLoss on sale of equipmentDecrease in common stockAdditions to plant and equipmentProceeds from sale of long-term investmentsGain on sale of investmentsProceeds from sale of equipment	$
(Click to select)Increase in common stockCash paid for merchandise purchasedDecrease in common stockIncome taxesProceeds from sale of long-term investmentsIncrease in accounts payableAdditions to plant and equipmentProceeds from sale of equipmentCash dividendsSelling and administrative expensesIncrease in inventoryGain on sale of investmentsLoss on sale of equipmentIssuance of bonds payable
(Click to select)Increase in inventoryIssuance of bonds payableDecrease in common stockLoss on sale of equipmentCash paid for merchandise purchasedProceeds from sale of long-term investmentsIncome taxesAdditions to plant and equipmentIncrease in accounts payableProceeds from sale of equipmentGain on sale of investmentsIncrease in common stockSelling and administrative expensesCash dividends
Total cash disbursements
Net cash (Click to select)provided byused for operating activities
Investing activities:
(Click to select)Proceeds from sale of equipmentIncrease in property, plant and equipmentProceeds from sale of long-term investmentsSelling and administrative expensesIncrease in accrued liabilitiesIncrease in common stockIncrease in inventoryIncome taxesCash dividendsDecrease in common stockDecrease in property, plant and equipmentGain on sale of investmentsLoss on sale of equipmentIncrease in accounts payableIssuance of bonds payable
(Click to select)Issuance of bonds payableProceeds from sale of equipmentLoss on sale of equipmentIncome taxesIncrease in accounts payableCash dividendsIncrease in common stockGain on sale of investmentsProceeds from sale of long-term investmentsIncrease in inventoryIncrease in property, plant and equipmentIncrease in accrued liabilitiesDecrease in property, plant and equipmentSelling and administrative expensesDecrease in common stock
(Click to select)Decrease in property, plant and equipmentGain on sale of investmentsSelling and administrative expensesIncrease in inventoryProceeds from sale of long-term investmentsDecrease in common stockProceeds from sale of equipmentIncrease in property, plant and equipmentIncrease in common stockCash dividendsIssuance of bonds payableIncrease in accrued liabilitiesIncrease in accounts payableLoss on sale of equipmentIncome taxes
Net cash (Click to select)provided byused for investing activities
Financing activities:
(Click to select)Proceeds from sale of long-term investmentsProceeds from sale of equipmentIncome taxesIncrease in common stockIncrease in accounts payableCash dividendsSelling and administrative expensesCost of merchandise soldIssuance of bonds payableDecrease in common stockIncrease in accrued liabilitiesAdditions to plant and equipment
(Click to select)Issuance of bonds payableSelling and administrative expensesIncome taxesProceeds from sale of equipmentCost of merchandise soldCash dividendsAdditions to plant and equipmentIncrease in accrued liabilitiesIncrease in accounts payableIncrease in common stockProceeds from sale of long-term investmentsDecrease in common stock
(Click to select)Increase in accounts payableSelling and administrative expensesAdditions to plant and equipmentIncrease in accrued liabilitiesProceeds from sale of long-term investmentsIssuance of bonds payableCash dividendsProceeds from sale of equipmentCost of merchandise soldIncrease in common stockIncome taxesDecrease in common stock
Net cash (Click to select)used forprovided by financing activities
(Click to select)Net increase in cashNet decrease in cash
Cash balance, beginning
Cash balance, ending		$

A comparative balance sheet and income statement for Eaton Company follow. Eaton Company Comparative Balance Sheet December 31, 2011 and 2010 2011 2010 Assets Cash 3 Accounts receivable 410 280 nventory 45 90 Prepaid expenses Total current assets 564 492 Property, plant, and equipment 590 480 Less accumulated depreciation 100 90 Net property, plant, and equipment 490 390 Long-term investments 38 Total assets 1,072 920 Liabilities and Stockholders' Equity 300 240 Accounts payable Accrued liabilities 60 70 Income taxes payable 75 68 Total current liabilities 435 378 Bonds payable 275 80 Total liabilities 710 558 Common stock 222 300 Retained earnings 40 62 Total stockholders' equity 362 362 1,072 920 Total liabilities and stockholders' equity Eaton Company Income Statement For the Year Ended December 31, 20 Sales 780 Cost of goods sold 440 Gross margin 340 Selling and administrative expenses 209 Net operating income 131 Nonoperating items Gain on sale ofinvestments 10 Loss on sale of equipment (1) Income before taxes 40 Income taxes 42 Net income 98 During 2011, Eaton sold some equipment for $18 that had cost $39 and on which there was accumulated depreciation of $20. In addition, the company sold long-term investments for $30 that had cost $20 when purchased several years ago. A cash dividend was paid during 20 11 and the company, repurchased $78 of its own stock. Eaton did not retire any bonds during 2011