P23.4 (LO 2, 4) (SCF-Direct Method) Michaels Company had available at the end of 2020 the following information. 2019 Michaels Company Comparative Balance Sheets As of December 31, 2020 and 2019 2020 Cash $ 10,000 Accounts receivable 20,500 Short-term investments 22,000 Inventory 42,000 Prepaid rent 3,000 Prepaid insurance 2,100 Supplies 1,000 Land 125,000 Buildings 350,000 Accumulated depreciation-buildings (105,000) Equipment 525,000 Accumulated depreciation-equipment (130,000) Patents 45,000 Total assets $910,600 Accounts payable $ 22,000 Income taxes payable 5,000 Salaries and wages payable 5,000 Short-term notes payable 10,000 Long-term notes payable 60,000 Bonds payable 400,000 Premium on bonds payable 20,303 Common stock 240,000 Paid-in capital in excess of par-common stock 25,000 Retained earnings 123,297 Total liabilities and stockholders' equity $910,600 $ 4,000 12,950 30,000 35,000 12,000 900 750 175,000 350,000 (87,500) 400,000 (112,000) 50,000 $871,100 $ 32,000 4,000 3,000 10,000 70,000 400,000 25,853 220,000 17,500 88,747 $871,100 Michaels Company Income Statement and Dividend Information For the Year Ended December 31, 2020 Sales revenue Cost of goods sold $1,160,000 748.999 5,000 10,000 60,000 400,000 Salaries and wages payable Short-term notes payable Long-term notes payable Bonds payable Premium on bonds payable Common stock Paid-in capital in excess of par-common stock Retained earnings Total liabilities and stockholders' equity 20,303 3,000 10,000 70,000 400,000 25,853 220,000 17,500 88,747 $871,100 240,000 25,000 123,297 $910,600 $1,160,000 748,000 412,000 Michaels Company Income Statement and Dividend Information For the Year Ended December 31, 2020 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expenses $ 79,200 Administrative expenses 156,700 Depreciation/Amortization expense 40,500 Total operating expenses Income from operations Other revenues/expenses Gain on sale of land 8,000 Gain on sale of short-term investment 4,000 Dividend revenue 2,400 Interest expense (51,750) Income before taxes Income tax expense Net income Dividends to common stockholders To retained earnings 276,400 135,600 (37,350) 98,250 39,400 58,850 (24,300) 34,550 $ 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