An income statement and comparative balance sheets for Julian Corp follows:

Julian Corp.

Income Statement

For the Year Ended December 31, 2015

Revenues and gains:

Sales revenue $670,000

Interest revenue 15,000

Gain on sale of machine 5,000

Total revenues and gains $690,000

Expenses and losses:

Cost of goods sold $390,000

Salaries and wages 60,000

Depreciation 40,000

Insurance 12,000

Interest 15,000

Income taxes 50,000

Loss on retirement of bonds 3,000

Total expenses and losses 570,000

Net income $120,000

Julian Corp

Comparative Balance Sheets

December 31

2015 2014

Cash $ 35,000 $ 46,000

Accounts receivable 63,000 57,000

Inventory 84,000 92,000

Prepaid insurance 12,000 18,000

Total current assets $194,000 $213,000

Long-term investments $120,000 $ 90,000

Land 150,000 100,000

Property and equipment 320,000 280,000

Accumulated depreciation (100,000) (75,000)

Total long-term assets $490,000 $395,000

Total assets $684,000 $608,000

Accounts payable $ 38,000 $ 31,000

Salaries and wages payable 7,000 9,000

Income taxes payable 8,000 5,000

Total current liabilities $ 53,000 $ 45,000

Notes payable $ 85,000 $ 35,000

Bonds payable 200,000 260,000

Total long-term liabilities $285,000 $295,000

Capital stock $100,000 $ 75,000

Retained earnings $246,000 $193,000

Total stockholders' equity $346,000 $268,000

Total liabilities and SE $684,000 $608,000

Additional Information

1. Long-term investments were purchased for $30,000. The securities are classified as

available for sale.

2. Land was purchased by issuing a $50,000 note payable.

3. A machine with an original cost of $35,000 was sold.

4. Bonds with a face value of $60,000 were retired by paying $63,000 in cash.

Required

• Prepare a statement of cash flows for 2015 using the direct method. Include supplemental

schedules to report any noncash investing and financing activities.

• Re-compute cash flow under operating activity using the indirect method. (Operating section

only)

• Interpret the result of the cash flow statement.