I. Statement of Cash Flows (25 points)

A comparative balance sheet for Lyon Company appears below:

LYON COMPANY

Comparative Balance Sheet

Dec. 31, 2008 Dec. 31, 2007

Assets

Cash $ 23,000 $10,000

Accounts receivable 18,000 14,000

Inventory 27,000 18,000

Prepaid expenses 6,000 9,000

Long-term investments -0- 18,000

Equipment 60,000 32,000

Accumulated depreciationequipment (18,000) (14,000)

Total assets $116,000 $87,000

Liabilities and Stockholders' Equity

Accounts payable $ 17,000 $ 7,000

Bonds payable 37,000 47,000

Common stock 40,000 23,000

Retained earnings 22,000 10,000

Total liabilities and stockholders' equity $116,000 $87,000

Additional information:

1. Net income for the year ending December 31, 2008 was $24,000.

2. Cash dividends of $12,000 were declared and paid during the year.

3. Long-term investments that had a cost of $18,000 were sold for $16,000.

4. No plant assets were sold during the year.

Instructions

Prepare a statement of cash flows (see below) for the year ended December 31, 2008, using the indirect method.

LYON COMPANY

Statement of Cash Flows

For the Year Ended December 31, 2008

Type the amount on the left side of the box shown

Cash flows from operating activities

Net income.................................................................

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation expense .........................................

Loss on sale of long-term investments................

Increase in accounts receivable ...........................

Decrease in prepaid expenses ............................

Increase in inventories ........................................

Increase in accounts payable ..............................

Net cash provided by operating activities ..........

Cash flows from investing activities

Sale of long-term investments ...................................

Purchase of equipment ..............................................

Net cash used by investing activities ................................

Cash flows from financing activities

Issuance of common stock ........................................

Retirement of bonds payable .....................................

Payment of cash dividends ........................................

Net cash used by financing activities ..................

Net increase in cash ..........................................................

Cash at beginning of period ..............................................

Cash at end of period ....................................................... $____________