ICE Drilling Inc.

Comparative Balance Sheet Information

December 31

2014 2013

Cash ............................................... $120,680 $171,640

Accounts receivable ........................ 145,600 111,160

Merchandise inventory.................... 613,200 565,600

Prepaid expenses............................ 1 2,040 14,000

Equipment....................................... 357,280 246,400

Accumulated depreciation............... 77,560 98,560

Accounts payable............................ 197,400 261,240

Short-term notes payable................ 22,400 14,000

Long-term notes payable................ 210,000 120,400

Common shares.............................. 450,800 350,000

Retained earnings............................ 290,640 264,600

ICE Drilling Inc.

Income Statement

For Year Ended December 31, 2014

Sales .............................................. $1,111,600

Cost of goods sold ......................... 560,000

Gross profit ..................................... $ 551,600

Operating expenses:

Depreciation expense..... $ 42,000

Other expenses............... 305,760

Total operating expenses.................................. 347,760

Loss on sale of equipment............................... 11,480

Income from operations............................. $ 192,360

Income taxes......................................................... 27,160

Net income............................................................ $ 165,200

Additional information regarding ICE Drillings activities during 2014:

1. Loss on sale of equipment is $11,480.

2. Paid $70,280 to reduce a long-term note payable.

3. Equipment costing $105,000, with accumulated depreciation of $63,000, is sold for cash.

4. Equipment costing $215,880 is purchased by paying cash of $56,000 and signing a long-term note payable for the balance.

5. Borrowed $8,400 by signing a short-term note payable.

6. Issued 5,600 common shares for cash at $18 per share.

7. Declared and paid cash dividends of $139,160.

Required Prepare a statement of cash flows for 2014 that reports the cash inflows and outflows from operating activities according to the indirect method. Show your supporting calculations. Also prepare note describing non-cash investing and financing activities.

Analysis Component: Merchandise Inventory, Prepaid Expenses, Long-Term Notes Payable, and Common Shares are some of the accounts that changed during 2014. Explain what transactions likely caused each of these accounts to increase and/or decrease.