PREPARE DIRECT METHOD

Condensed financial data of Mennan Company appear below:

MENNAN COMPANY

Comparative Balance Sheet

December 31

2010 2009

Assets

Cash $ 61,000 $ 35,000

Accounts receivable 75,000 53,000

Inventories 118,000 132,000

Prepaid expenses 21,000 25,000

Investments 100,000 75,000

Plant assets 325,000 250,000

Accumulated depreciation (65,000) (60,000)

Total $635,000 $510,000

Liabilities and Stockholders' Equity

Accounts payable $ 98,000 $ 75,000

Accrued expenses payable 24,000 24,000

Bonds payable 120,000 160,000

Common stock 275,000 170,000

Retained earnings 118,000 81,000

Total $635,000 $510,000

MENNAN COMPANY

Income Statement

For the Year Ended December 31, 2010

Sales $470,000

Less:

Cost of goods sold $310,000

Operating expenses (excluding depreciation) 50,000

Depreciation expense 17,000

Income taxes 20,000

Interest expense 18,000

Loss on sale of plant assets 3,000 418,000

Net income $ 52,000

Additional information:

1. New plant assets costing $100,000 were purchased for cash in 2010.

2. Old plant assets costing $25,000 were sold for $10,000 cash when book value was $13,000.

3. Bonds with a face value of $40,000 were converted into $40,000 of common stock.

Instructions

Prepare a statement of cash flows for the year using the DIRECT method.