Problem 23-4 Michaels Company had the following information available at the end of 2014.

MICHAELS COMPANY

COMPARATIVE BALANCE SHEETS

AS OF DECEMBER 31, 2014 AND 2013

2014 2013

Cash $10,100 $3,570

Accounts receivable 20,590 13,450

Short-term investments 21,500 31,410

Inventory 41,110 36,540

Prepaid rent 2,410 13,800

Prepaid insurance 2,830 910

Supplies 1,190 810

Land 124,860 173,170

Buildings 350,250 350,250

Accumulated depreciationbuildings (105,470 ) (88,380)

Equipment 524,930 400,270

Accumulated depreciationequipment (130,770 ) (113,460 )

Patents 45,220 51,240

Total assets $908,750 $873,580

Accounts payable $22,090 $31,740

Income taxes payable 5,620 4,390

Salaries and wages payable 5,720 3,030

Short-term notes payable 10,450 10,450

Long-term notes payable 60,100 70,310

Bonds payable 400,560 400,560

Premium on bonds payable 15,103 26,750

Common stock 240,330 219,530

Paid-in capital in excess of parcommon stock 25,447 17,600

Retained earnings 123,330 89,220

Total liabilities and stockholders equity $908,750 $873,580

MICHAEL S COMPANY

INCOME STATEMENT AND DIVIDEND INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2014

Sales revenue $1,160,650

Cost of goods sold 748,580 412,070

Gross margin

Operating expenses

Selling expenses $79,450

Administrative expenses 156,740

Depreciation/Amortization expense 40,420

Total operating expenses 276,610

Income from operations 135,460

Other revenues/expenses

Gain on sale of land 8,130

Gain on sale of short-term investment 4,210

Dividend revenue 3,000

Interest expense (52,640 ) (37,300 )

Income before taxes 98,160

Income tax expense 39,690

Net income 58,470

Dividends to common stockholders (24,360 )

To retained earnings $34,110

Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are classified as available-for-sale. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)