heme: 1. explain the purpose and format of the statement of cash flows. Also, describe its use to decision makers.

2. review below Spirit company's financial data and apply what you've learned for preparing statement of cash flow and calculate the net cash flows provided (used) by financing activities. Don't hesitate to discuss your thoughts and results with others.

Spirit Company, a merchandiser, recently completed its 2013 calendar year. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheet and income statement follow:

Additional information on year 2013 transactions: a. The loss on the cash sale of equipment was $5,875 (details in b). b. Sold equipment costing $46,500, for a loss of $5,875. c. Purchased equipment costing $99,000 by paying $35,000 cash and signing a long-term note payable for the balance. d. Borrowed $2,000 cash by signing a nonsales-related short-term note payable. e. Paid $47,500 cash to reduce the long-term notes payable. f. Issued 2,400 shares of common stock for $20 cash per share. g. Net income and dividends were the only items that affected retained earnings.

SPIRIT COMPANY Comparative Balance Sheet December 31, 2013 and 2012 2013 2012 Assets Cash $ 49,200 $ 73,500 Accounts receivable 65,830 51,000 Merchandise inventory 276,000 252,500 Prepaid expenses 1,000 1,600 Equipment 159,000 106,500 Accum. depreciation Equipment (31,000) (40,000) Total assets $520,030 $445,100 Liabilities and Equity Accounts payable $ 58,555 $ 112,000 Short-term notes payable 9,000 7,000 Long-term notes payable 65,000 48,500 Common stock, $5 par value 162,750 150,750 Paid-in capital in excess of par, common 36,000 0 stock Retained earnings 188,725 126,850 Total liabilities and equity $520,030 $445,100 $584,000 283,000 301,000 SPIRIT COMPANY Income Statement For Year Ended December 31, 2013 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 20,000 Other expenses 132,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 152,400 5,875 $142,725 24,250 $118,475