Additional Information a. A $20,000 note payable is retired at its carrying value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $120,000 cash. d. Received cash for the sale of equipment that had cost $85.000. yielding a gain of $4.700. e. Prepaid expenses relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit. Use the following financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 20X2 using the indirect method. Derby Company Balance Sheets At December 31 20x2 20x1 Assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Equipment Accumulated depreciation Equipment Total assets $ 85,600 72,850 157,750 6,080 280,600 (80,600) $522,280 $ 65,200 56,750 144.850 12.680 245,600 (97.600) $427,480 Liabilities: Accounts payable Income taxes payable Notes payable (long term) Total liabilities Equity: $ 52,850 15,240 59,200 $127,290 $ 45,450 12.240 79.200 $136.890 Common stock Paid-in capital in excess of par Retained earnings Total equity Total liabilities and equity 200,000 53,000 141.990 $394.990 $522.280 150.000 40.000 100.590 $290.590 $427.480 $488.000 Derby Company Income Statement For Year Ended December 31, 20X2 Sales Cost of goods sold $212,540 Depreciation expense 43,000 Other operating expenses 106,260 Interest expense 6.400 Other gains (losses): Gain on sale of equipment Income before taxes Income taxes expense Net income (368,200) 4.700 124,500 41.100 $ 83,400