Sanchez Corporations comparative balance sheets as of June 30,yr 1 and yr 2 and its yr. 2 income statement is as follows: (20 marks)

Assets Yr1 Yr2

Cash 167,000 20,000

Accounts Receivables 100,000 120,000

Inventory 180,000 220,000

Prepaid Expenses 600 1000

Plant and Equipment 628,000 552,000

Accumulated Depreciation (183,000) (140,000)

Total Assets 892,000 773,000

Liabilities and Stockholders Equity; Yr1 Yr. 2

Accounts payable 64,000 42,000

Notes Payable 30,000 80,000

Income Taxes Payable 26,000 18,000

Mortgage Payable 360,000 280,000

Common Stock-$5 par value 200,000 200,000 .

Retained Earnings 212,600 153,000

Total Liabilities and Stockholders Equity 892,000 773,000

Income Statement For the Year Ended June 30, Yr. 2

Sales $1,040,900

Cost of goods Sold ( 656,000)

Gross Profit 384,600

Operating Exp(Including depreciation Exp of 60,000) (189,200)

Income from Operations 195,400

Loss on Disposal of Equipment (4000)

Interest Expense (37,600)

Income before Income taxes

153,800 Income Taxes 34,200

Net Income 119,600

Additional information about yr2:

a) Equipment with book value of $7000 was sold at $3000.

b) Land and building were purchased in the amount of $100,000 through an increase of $100,000 in the mortgage payable. (non- cash transaction)

c) A $20,000 payment was made on the mortgage.

d) The notes payable of yr1 were repaid.

e) The company borrowed additional $30,000 through the issuance of new note payable.

f) A $60,000 cash dividend was paid. Required:

Prepare a statement of cash flows using the direct method and supporting schedule of non-cash investing and financing transactions.