Diamond Corporation has contracted with you to prepare a statement of cash flows.

The controller has provided the following information.

	2013	2012
Cash	38,500	13,000
Accounts receivable	9,250	5,500
Inventory	12,000	10,000
Investments	0	3,000
Buildings	0	29,750
Equipment	40,000	20,000
Copyrights	5,000	5,250
Totals	104,750	87,000
Accumulated depreciationequipment	2,000	4,500
Accumulated depreciationbuildings	0	6000
Accounts payable	5,000	4,000
Dividends payable	0	5,000
Notes payable, short-term (nontrade)	3,000	4,000
Long-term notes payable	36,000	25,000
Common stock	38,000	33,000
Retained earnings	20,750	5,000
Totals	104,750	87,000

Additional data related to 2013 are as follows.

1. Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.

2. $5,000 of the long-term note payable was paid by issuing common stock.

3. Cash dividends paid were $5,000.

4. On January 1, 2014, the building was completely destroyed by a flood. Insurance proceeds on the building were $37,000.

5. Investments (available-for-sale) were sold at $1,500 above their cost. The company has made similar sales and investments in the past.

6. Cash and long-term note for $16,000 were given for the acquisition of equipment.

Instructions

(a) Use the indirect method to analyze the above information and prepare a statement of cash flows for Diamond. Flood damage is unusual and infrequent in that part of the country.

(b) What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:

(1) A severely financially troubled firm?

(2) A recently formed firm that is experiencing rapid growth?