CS1V1 3 Starwax Surfaces specializes in making granite countertops. A new accounting clerk has compiled the = following information to prepare the statement of cash flows for the year ended December 31, 2021. Net income for the year was $125,400. Depreciation expense was $17,520. Equipment was sold for a gain of $14,620. Cash proceeds from the sale were $29,540. Equipment was purchased for $185,400. Dividends of $42,300 were paid. Accounts receivable increased by $26.450. Merchandise inventory decreased by $28,560. Accounts payable increased by $35,860. Notes payable increased by $60,000. Shares were sold for $55,000 (also their book value). Cash balance on January 1, 2021, was $124,500. Cash balance on December 31, 2021, was $207,610. 2 B 5 The statement of cash flows the accounting clerk prepared is shown below. 19 The statement of cash flows the accounting clerk prepared is shown below. Starwax Surfaces coa UI Statement of Cash Flows For the Year Ended December 31, 2021 23 Cash Flow from Operating Activities Net Income $125,400 26 Adjustments to Reconcile Net Income to Net Cash 27 Provided (Used) by Operating Activities 18 Depreciation Expense 17,520 o Changes in Operating Assets and Liabilities Increase in Accounts Receivable 26,450 1 Decrease in Merchandise Inventory 28,560 2 Increase in Accounts Payable 35,860 3 Sale of Equipment 29,540 Purchase of Equipment 185,400 Net Cash Provided (Used) by Operating Activities 20,810 Cash Flow from Investing Activities Proceeds from Notes Payable Net Cash Provided (Used) by Investing Activities 60,000 60,000 Cash Flow from Financing Activities Payment of Cash Dividend Proceeds from Issuance of Common Shares Net Cash Provided (Used) by Financing Activities 42,300 55,000 12,700 Sale of Equipment Purchase of Equipment 35 Net Cash Provided (Used) by Operating Activities 29,540 185,400 20,810 60,000 60,000 37 Cash Flow from Investing Activities Proceeds from Notes Payable 39 Net Cash Provided (Used) by Investing Activities 40 41 Cash Flow from Financing Activities 42 Payment of Cash Dividend 43 Proceeds from Issuance of Common Shares 44 Net Cash Provided (Used) by Financing Activities 45 46 Net Increase (Decrease) in Cash 47 Cash at the Beginning of the Year 42,300 55,000 12,700 93,510 124,500 $218,010 48 Cash at the End of the Year 49 50 51 a) Identify the problems with the statement of cash flows that the accounting clerk prepared. El a) Identify the problems with the statement of cash flows that the accounting clerk prepared. 65 0 18 9 1 b) Prepare a corrected statement of cash flows. 2 3 4 5 6 7 LU 3 3