Problem 23-3

Pearl Company has not yet prepared a formal statement of cash flows for the 2017 fiscal year. Comparative balance sheets as of December 31, 2016 and 2017, and a statement of income and retained earnings for the year ended December 31, 2017, are presented as follows.

PEARL COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 ($000 OMITTED)
Sales revenue				$3,840
Expenses
Cost of goods sold		$1,190
Salaries and benefits		720
Heat, light, and power		70
Depreciation		80
Property taxes		20
Patent amortization		30
Miscellaneous expenses		10
Interest		30		2,150
Income before income taxes				1,690
Income taxes				845
Net income				845
Retained earningsJan. 1, 2017				300
				1,145
Stock dividend declared and issued				615
Retained earningsDec. 31, 2017				$530

PEARL COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 ($000 OMITTED)
Assets		2017			2016
Current assets
Cash		$337			$90
U.S. Treasury notes (available-for-sale)		10			50
Accounts receivable		780			490
Inventory		710			570
Total current assets		1,837			1,200
Long-term assets
Land		160			80
Buildings and equipment		920			610
Accumulated depreciationbuildings and equipment		(190	)		(110	)
Patents (less amortization)		120			150
Total long-term assets		1,010			730
Total assets		$2,847			$1,930
Liabilities and Stockholders Equity
Current liabilities
Accounts payable		$423			$360
Income taxes payable		39			30
Notes payable		340			340
Total current liabilities		802			730
Long-term notes payabledue 2019		180			180
Total liabilities		982			910
Stockholders equity
Common stock		1,335			720
Retained earnings		530			300
Total stockholders equity		1,865			1,020
Total liabilities and stockholders equity		$2,847			$1,930

Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

PEARL COMPANY