Review the Condensed Income Statement and Statement of Retained Earnings for Ortega's Pizza and complete the balance sheet below.

INCOME STATEMENT:

Sales:$700,000

Cost of Sales: $210,000

Gross Profit:$490,000

Operating Expenses (Excluding Depreciation): $388,000

Depreciation:$14,000

Operating Income: $88,000

Interest: $30,000

Income before Income Taxes: $58,000

Income Taxes (40%): $23,000

Net Income: $35,000

Statement of Retained Income Earnings

Retained Earnings, December 31, 2010: $50,000

Net Income for 2011: $35,000

Subtotal: $85,000

Cash Dividends Paid in 2011: $20,000

Retained Earnings, December 31, 2011: $65,000

Ortega's Pizza
Balance Sheets
December 31, 2010 and 2011
	2010	2011		Sources	Uses
Assets
Current Assets
Cash	42,000	30,000
Marketable Securities	85,000	91,000
Net Receivables	93,000	80,000
Inventories	58,000	67,000
Total Current Assets	278,000	268,000
Property and Equipment	965,000	915,000
Less Accumulated Depreciation	40,000	30,000
Net Property and Equipment	925,000	885,000
Total Assets	1,203,000	1,153,000
Liabilities and Owners' Equity
Current Liabilities
Accounts Payable	40,000	45,000
Notes Payable	125,000	150,000
Accrued Wages	38,000	23,000
Total Current Liabilities	203,000	218,000
Long-Term Liabilities
Long-Term Debt	500,000	300,000
Total Liabilities	703,000	518,000
Owners' Equity
Common Stock	75,000	95,000
Paid in Capital	375,000	475,000
Retained Earnings	50,000	65,000
Total Owners' Equity	500,000	635,000
Total Liabilities and Owner's Equity	1,203,000	1,153,000
Total Sources and Uses of Funds

Ortega's Pizza
Statement of Cash Flows
December 31, 2011
Net Cash Flow from Operating Activities
Net Income
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation
Decrease in Net Receivables
Increase in Inventories
Increase in Accounts Payable
Decrease in Accrued Wages
Net Cash Flow from Operating Activities
Net Cash Flow from Investing Activities
Increase in Marketable Securities
Decrease in Property and Equipment
Net Cash Flow from Investing Activities
Net Cash Flow from Financing Activities
Increase in Notes Payable
Decrease in Long-Term Debt
Increase in Capital Stock (Common Stock + Paid Capital)
Dividends Paid
Net Cash Flow from Financing Activities
Net Decrease in Cash during 2011
Cash at the beginning of 2011
Cash at the end of 2011
Supplementary Disclosure of Cash Flow Information:
Cash paid during the year for
Interest
Income Taxes

a. Did the change in "Inventories" reflect a Source or a Use of funds? What was the amount of that change?

b. Did the change in "Long-Term Debt" reflect a Source or a Use of funds? What was the amount of that change?

c. What is Victor's proper entry for "Net Cash Flow from Operating Activities?

d. What is Victor's proper entry for "Net Cash Flow from Investing Activities"?

e. What is Victor's proper entry for "Net Cash Flow from Financing Activities"?