Dingel Corporation has contracted with you to make a statement of cash flows. The controller has provided the following information.

December 31

2017

2016

Cash

$38,500

$13,000

Accounts receivable

12,250

10,000

Inventory

12,000

10,000

Equity investments

-0-

3,000

Buildings

-0-

29,750

Equipment

40,000

20,000

Copyrights

5,000

5,250

Totals

$107,750

$91,000

Allowance for doubtful accounts

$ 3,000

$ 4,500

Accumulated depreciationequipment

2,000

4,500

Accumulated depreciationbuildings

-0-

6,000

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

$107,750

$91,000

Additional data related to 2017 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, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).
• 5.Equity investments (ownership is less than 20% of total shares) were sold at $1,500 above their cost. No unrealized gains or losses were recorded in 2017.
• 6.Cash and long-term note for $16,000 were given for the acquisition of equipment.
• 7.Interest of $2,000 and income taxes of $5,000 were paid in cash.

Instructions

(a)Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel.

(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?