A. Karev Medical Supplies

Comparative Balance Sheet

December 31, 2008 and 2007

	2008	2007	Increase/(Decrease)
Current assets:
Cash and cash equivelents	$6,700	$5,300	$1,400
Accounts receivable	25,300	26,900	(1,600)
Inventory	91,800	89,800	2,000
Plant Assets:
Land	89,000	60,000	29,000
Equipment, net	53,500	49,400	4,100
Total Assets	$266,300	$231,400	$34,900
Current Liabilities:
Accounts Payable	$30,900	$35,400	$(4,500)
Accrued Liabilities	30,600	28,600	2,000
Long-term Liabilities:
Notes Payable	75,000	100,000	(25,000)
Stockholders' equity:
Common Stock	88,300	64,700	23,600
Retained Earnings	41,500	2,700	38,800
Total Liabilites and Stockholders' equity	$266,300	$231,400	$34,900

Karev Medical Supplies

Income Statement

Year Ended December 31,2008

	Revenues:
	Sales Revenue	$213,000
	Interest Revenue	8,600
	Total Revenues		$221,600
	Expenses:
	Cost of Goods Sold	$70,600
	Salary Expense	27,800
	Depreciation expense	4,000
	Other operating expenses	10,500
	Interest Expense	11,600
	Income tax expense	29,100
	Total expenses		153,600
	Net Income		$68,000

Using the A. Karev Medical Supplies data. The cash amounts for Interest Revenue, Salary Expense, Interest Expense, and Income Tax Expense are the same as the accrual amounts for these items.

Requirements:

1. Prepare the 2008 statement of cash flows by the direct method

2. How will what you learned in this problem help you evaluate an investment?