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.

(A)RequiredPrepare 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.

(B)Required: Prepare a statement of cash flows for 2014 using the direct method to report cash inflows and outflows from operating activities.

Other information:

1. All sales are credit sales,

2. All credits to accounts receivable in the period are receipts from customers.

3. Purchases of merchandise are on credit.

4. All debits to accounts payable in the period result from payments for merchandise.

5. The only decrease in income taxes payable is for payment of taxes.

6. The other expenses are paid in advance and are initially debited to Prepaid Expense.