Question #1 (20 marks)

The following information is taken from the operating section of the statement of cash flows (Direct Method) of DISTAFF & SPEAR Inc.:

Cash collections from customers	$58,000
Cash payments to suppliers for purchases	26,000
Cash payments for operating expenses	20,000
Cash payments for current period income taxes	9,000

The following information is obtained from the income statement of DISTAFF & SPEAR Inc.:

Depreciation expense	$9,000
Gain on disposition of equipment	4,000
Amortization of intangibles	2,500

In addition, the following information is obtained from the balance sheets of DISTAFF & SPEAR Inc.:

Increase in A/R	$6,750
Increase in inventory	6,750
Increase in A/P (related to purchases)	4,000
Decrease in accrued liability (related to operating expenses)	4,450
Decrease in tax payable	2,000

Required:

1. Prepare the income statement for the current year (12 marks)
2. Prepare CFO using the INDIRECT method (8 marks)