SCFs, prepare a complete statement of cash flows for Spitfire Corporation using the direct method of reporting cash flows from operating activities for the year ended December 31, Year 2. Show your work in the second tab labeled Spreadsheet for SCFs. Use the spreadsheet method as a tool with supporting t-accounts, summary entries or a combination of both. For both the direct and indirect method you will need to analyze the impact the Allowance for doubtful accounts has on accounts receivable and cash.

Spitfire Corporation Balance Sheets December 31, Year 1 and Year 2 Year 2 Year Assets Cash 90 152 269 Accounts receivable Less: Allowance for doubtful accounts 260 (5) (7) Prepaid insurance Inventory Long-term investment 10 6 240 248 70 46 170 170 Land Buildings and equipment Less: Accumulated depreciation Trademark 260 296 (80) (109) 30 28 Total Assets $1,045 $1,099 Liabilities & Stockholders' Equity 37 Accounts payable Salaries payable Deferred tax liability Lease liability Bonds Payable 52 3 4 16 20 70 280 120 Less: Discount on bonds (27) (25) 300 Common Stock 260 Paid-In Capital -in excess of par Preferred Stock 80 110 80 Retained Earnings Total Liabilities & Stockholders' Equity 384 $1,099 380 $1,045 Spitfire Corporation Income Statement For the Year Ended December 31, Year 2 Net sales revenue S 400 Investment revenue 14 Operating Expenses: Cost of Goods $ 160 Salaries expense Depreciation expense Trademark amortization 60 40 Bad debts expense Insurance expense Bond interest expense Operating Income 6 22 50 340 S 73 Other Income (Expense): Loss on sale of building Gain on sale of investments $(30) (24 Pre-Tax Income from Continuing Operations Less: Income Tax Expense: 50 26 $24 Net Income Additional Information . A building that originally cost $44 million, and which was one-fourth depreciated, was destroyed by fire. Some undamaged parts were sold for $3 million. 2. Investment revenue includes Spitfire Corporation's $8 million share of the net income of Beta Corporation, an equity method investee. 3. $40 million par value of common stock was sold for $70 million, and $80 million of preferred stock was sold at par 4. A long-term investment in bonds, originally purchased for $32 million, was sold for $38 million. 5. Pretax accounting income exceeded taxable income causing the deferred income tax liability to increase by $4 million. 6. The right to use a building was acquired with a seven-year lease agreement; present value of lease payments, $80 million. Annual lease payments of $10 million are paid at January 1 of each year starting in Year 2 7. $150 million of bonds were retired at maturity 8. Shareholders were paid cash dividends of $20 million Spitfire Corporation Balance Sheets December 31, Year 1 and Year 2 Year 2 Year Assets Cash 90 152 269 Accounts receivable Less: Allowance for doubtful accounts 260 (5) (7) Prepaid insurance Inventory Long-term investment 10 6 240 248 70 46 170 170 Land Buildings and equipment Less: Accumulated depreciation Trademark 260 296 (80) (109) 30 28 Total Assets $1,045 $1,099 Liabilities & Stockholders' Equity 37 Accounts payable Salaries payable Deferred tax liability Lease liability Bonds Payable 52 3 4 16 20 70 280 120 Less: Discount on bonds (27) (25) 300 Common Stock 260 Paid-In Capital -in excess of par Preferred Stock 80 110 80 Retained Earnings Total Liabilities & Stockholders' Equity 384 $1,099 380 $1,045 Spitfire Corporation Income Statement For the Year Ended December 31, Year 2 Net sales revenue S 400 Investment revenue 14 Operating Expenses: Cost of Goods $ 160 Salaries expense Depreciation expense Trademark amortization 60 40 Bad debts expense Insurance expense Bond interest expense Operating Income 6 22 50 340 S 73 Other Income (Expense): Loss on sale of building Gain on sale of investments $(30) (24 Pre-Tax Income from Continuing Operations Less: Income Tax Expense: 50 26 $24 Net Income Additional Information . A building that originally cost $44 million, and which was one-fourth depreciated, was destroyed by fire. Some undamaged parts were sold for $3 million. 2. Investment revenue includes Spitfire Corporation's $8 million share of the net income of Beta Corporation, an equity method investee. 3. $40 million par value of common stock was sold for $70 million, and $80 million of preferred stock was sold at par 4. A long-term investment in bonds, originally purchased for $32 million, was sold for $38 million. 5. Pretax accounting income exceeded taxable income causing the deferred income tax liability to increase by $4 million. 6. The right to use a building was acquired with a seven-year lease agreement; present value of lease payments, $80 million. Annual lease payments of $10 million are paid at January 1 of each year starting in Year 2 7. $150 million of bonds were retired at maturity 8. Shareholders were paid cash dividends of $20 million