Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales credit sales, (2) all credits to Account 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 Expense. The companys balance sheets and income statement follow. KAZAAM COMPANY Income Statement For Year Ended December 31, 2011 Sales $496,250 Cost of Goods sold 250,000 Gross profit 246,250 Operating expenses Depreciation expense $18,750 Other expenses 136,500 155,250 Other gains (losses) Loss on sale of equipment 5,125 Income before taxes 85,875 Income tax expense 12,125 Net Income $73,750 KAZAAM COMPANY Comparative Balance Sheets December 31,2011 and 2010 2011 2012 Assets Cash $53,875 $76,625 Accounts receivable 65,000 49,625 Merchandise Inventory 273,750 252,500 Prepaid expenses 5,375 6,250 Equipment 159,500 110,000 Accum. Depreciation - equip (34,625) (44,000) Total Assets $522,875 $451,000 Liabilities and Equity Accounts Payable $88,125 $116,625 Short term notes payable 10,000 6,250 Long term notes payable 93,750 53,750 Common stock, $5 par value 168,750 156,250 Paid in Capital in excess of par, common stock 32,500 0 Retained earnings 129,750 118,125 Total Liabilities and equity $522,875 $451,000 Additional Information on Year 2011 a. the loss on the cash sale of equipment was $5,125 (details in b) b. Sold equipment costing $46,875 with accumulated depreciation of $28,125 for $13,624 cash. c. Purchased equipment costing $96,375 by paying $25,000 cash and signing a long term note payable for the balance. d. Borrowed $3,750 cash by signing a short term note payable. e. Paid $31,375 cash to reduce the long term notes payable. f. Issued 2,500 shares of common stock for $18 cash per share. g. Declared and paid cash dividends of $62,125. Required 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. Disclose any noncash investing and financing activities in a note. Analysis component 2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment