Data for Pat Metheny Company are presented in E23-11. Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

PAT METHENY COMPANY

COMPARATIVE BALANCE SHEET

AS OF DECEMBER 31, 2008 AND 2007

2008 2007

Cash $1,800 $1,150

Receivables 1,750 1,300

Inventory 1,600 1,900

Plant assets 1,900 1,700

Accumulated depreciation (1,200) (1,170)

Long-term investments (Held-to-maturity) 1,300 1,420

$7,150 $6,300

Accounts payable $1,200 $ 900

Accrued liabilities 200 250

Bonds payable 1,400 1,550

Capital stock 1,900 1,700

Retained earnings 2,450 1,900

$7,150 $6,300

PAT METHENY COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2008

Sales $6,900

Cost of goods sold 4,700

Gross margin 2,200

Selling and administrative expense 930

Income from operations 1,270

Other revenues and gains

Gain on sale of investments 80

Income before tax 1,350

Income tax expense 540

Net income 810

Cash dividends 260

Income retained in business $ 550