Panzarella Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts 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 Expenses.

PANZARELLA COMPANY Comparative Balance Sheets December 31
	Current Year				Prior Year
Assets
Cash	$	82,200			$	85,300
Accounts receivable		79,000				61,000
Inventory		284,000				259,000
Prepaid expenses		3,800				4,700
Total current assets		449,000				410,000
Equipment		280,000				192,000
Accum. depreciationEquipment		(70,000	)			(82,000	)
Total assets	$	659,000			$	520,000
Liabilities and Equity
Accounts payable	$	57,000			$	123,000
Short-term notes payable		15,000				9,000
Total current liabilities		72,000				132,000
Long-term notes payable		92,000				69,000
Total liabilities		164,000				201,000
Equity
Common stock, $5 par value		216,500				190,000
Paid-in capital in excess of par, common stock		79,500				0
Retained earnings		199,000				129,000
Total liabilities and equity	$	659,000			$	520,000

PANZARELLA COMPANY Income Statement For Current Year Ended December 31
Sales				$	1,013,000
Cost of goods sold					375,000
Gross profit					638,000
Operating expenses
Depreciation expense	$	28,000
Other expenses		230,000			258,000
Other gains (losses)
Loss on sale of equipment					(8,300	)
Income before taxes					371,700
Income taxes expense					65,000
Net income				$	306,700

Additional Information on Current Year Transactions

The loss on the cash sale of equipment was $8,300 (details in b).

Sold equipment costing $77,000, with accumulated depreciation of $40,000, for $28,700 cash.

Purchased equipment costing $165,000 by paying $38,000 cash and signing a long-term note payable for the balance.

Borrowed $6,000 cash by signing a short-term note payable.

Paid $104,000 cash to reduce the long-term notes payable.

Issued 5,300 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $236,700.

1. General Journal tab - Reconstruct the entries to summarize the activity between December 31, prior year and December 31, current year.

2. Direct Method tab - Prepare the Statement of Cash flows for the year ended December 31, current year using the direct method.

3. Indirect Method tab - Prepare the reconciliation to the indirect method.