P23-1B (L02,4) (SCFIndirect Method) The following are Sanibel Corp.'s comparative balance sheet accounts at Decem- ber 31, 2017 and 2016, with a column showing the increase (decrease) from 2016 to 2017. COMPARATIVE BALANCE SHEETS Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Investment in Island Co. Loan receivable Total assets 2017 $ 650,000 1,260,000 1,538,000 2,680,000 (850,000) 475,000 350,000 $6,103,000 2016 $ 510,000 1,090,000 1,370,000 1,763,000 (760,000) 420,000 450,000 $4,843,000 Increase (Decrease) $ 140,000 170,000 168,000 917,000 (90,000) 55,000 (100,000) $1,260,000 Accounts payable Income taxes payable Dividends payable Capital lease obligation Common stock, $1 par Paid-in capital in excess of par-common stock Retained earnings Total liabilities and stockholders' equity $1,080,000 90,000 100,000 850,000 400,000 2,100,000 $ 910,000 75,000 60,000 0 400,000 2,100,000 $ 170,000 15,000 40,000 850,000 0 0 1,483,000 $6,103,000 1,298,000 $4,843,000 185,000 $1,260,000 Additional information: 1. On December 31, 2016, Sanibel acquired 25% of Island Co.'s common stock for $420,000. On that date, the carrying value of Island's assets and liabilities, which approximated their fair values, was $1,680,000. Island reported income of $220,000 for the year ended December 31, 2017. No dividend was paid on Island's common stock during the year. 2. During 2016, Sanibel loaned $500,000 to POI Co., an unrelated company. POI made the first semi-annual principal repay- ment of $50,000, plus interest at 10%, on December 31, 2016. POI is current on the loan as of December 31, 2017. 3. On January 2, 2017, Sanibel sold equipment costing $100,000, with a carrying amount of $31,000, for $20,000 cash. 4. On December 31, 2017, Sanibel entered into a capital lease for a new factory. The present value of the annual rental pay- ments is $850,000, which equals the fair value of the building. Sanibel made the first rental payment of $120,000 when due on January 2, 2018 5. Net income for 2017 was $285,000. 6. Sanibel declared and paid cash dividends for 2017 and 2016 as follows. Declared Paid Amount 2017 December 15, 2017 February 28, 2018 $100,000 2016 December 15, 2016 February 28, 2017 $60,000 Instructions Prepare a statement of cash flows for Sanibel Corp. for the year ended December 31, 2017, using the indirect method. (AICPA adapted)