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1. On the basis of the following data for Larson Co. for the year ending December 31 Year 2, and the preceding year ended December 31 Year 1, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that:

Equipment costing $125,000 was purchased for cash.

Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.

The stock was issued for cash.

The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000. (16-151)

	Year 2		Year 1
Cash	$100,000		$ 78,000
Accounts receivable (net)	78,000		85,000
Inventories	101,500		90,000
Equipment	410,000		370,000
Accumulated depreciation	(150,000)		(158,000
	$539,500		$465,000
Accounts payable (merchandise creditors)	$ 58,500		$ 55,000
Cash dividends payable	5,000		4,000
Common stock, $10 par	200,000		170,000
Paidin capital in excess of parcommon stock	62,000		60,000
Retained earnings	214,000		176,000
	$539,500		$465,000