Instructions Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule Assume the short-term investments are debt securities, classified as available for sale. P23.5 (L02,4) (SCF-Indirect Method) You have completed the field work in connection with your audit of Alexander Corpo ration for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below Dec. 31, 2017 Dec. 31, 2016 $ 298,000 353,000 610,000 8,000 Cash Accounts receivable Inventory Prepaid expenses Investment in subsidiary Cash surrender value of life insurance Machinery Buildings Land Patents Copyrights Bond discount and issue costs $ 277,900 469,424 741,700 12.000 110,500 2,304 207,000 535,200 52,500 69.000 40.00 4,502 Increase or (Decrease) ($20,100) 116,424 131,700 4.000 110,500 504 17.000 127,300 1,800 190,000 407,900 52,500 64,000 50,000 5,000 (10,000) 4,502 S486,830 $2.522,030 $2,035,200 $ $ 90,250 299,280 70,000 125.000 79,600 280,000 Income taxes payable Accounts payable Dividends payable Bonds payable 8% Bonds payable-12% Allowance for doubtful accounts Accumulated depreciation buildings Accumulated depreciation-machinery Premium on bonds payable Common stock-no par Paid-in capital in excess of par-common stock Retained earnings-unappropriated 35,300 424,000 173,000 100,000 40.000 400,000 130,000 2,400 1,453,200 - (450,000) $2,035,200 $ 10,650 19,280 70,000 125,000 (100,000) (4.700) 24,000 43,000 (2,400) (277,000) 109.000 470,000 $486,830 1,176,200 109,000 20,000 $2,522,030 Problems 1387 STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 January 1, 2017 April 1, 2017 $(450,000 25,000 425,000 Balance (deficit) Net income for first quarter of 2017 Transfer from paid-in capital Balance Net income for last three quarters of 2017 Dividend declared-payable January 21, 2018 Balance December 31, 2017 90,000 (70,000) $ 20,000 Your working papers from the audit contain the following information: 1. On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the no par stock. 2. On November 1, 2017, 29,600 shares of no-par stock were sold for $257,000. The board of directors voted to regard $5 per share as stated capital. 3. A patent was purchased for $15,000. 4. During the year, machinery that had a cost basis of $16,400 and on which there was accumulated depreciation of $5,200 was sold for $9,000. No other plant assets were sold during the year. 5. The 12%, 20-year bonds were dated and issued on January 2, 2005. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017. 6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was $839. 7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2017, for $100,000. The income statement of Crimson Company for 2017 shows a net income of $15,000 8. Major repairs to buildings of $7,200 were charged to Accumulated Depreciation---Buildings. 9. Interest paid in 2017 was $10,500 and income taxes paid were $34,000. Instructions From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortiza- tion for bond interest