Simulation

The following is a condensed trial balance of Probe Co., a publicly held company, after adjustments for income tax expense.

Probe Co.
CONDENSED TRIAL BALANCE
	12/31/Y10	12/31/Y9	Net
	Balances	Balances	change
	Dr. (Cr.)	Dr. (Cr.)	Dr. (Cr.)
Cash	$ 484,000	$ 817,000	$(333,000)
Accounts receivable, net	670,000	610,000	60,000
Property, plant, and equipment	1,070,000	995,000	75,000
Accumulated depreciation	(345,000)	(280,000)	(65,000)
Dividends payable	(25,000)	(10,000)	(15,000)
Income taxes payable	(60,000)	(150,000)	90,000
Deferred income tax liability	(63,000)	(42,000)	(21,000)
Bonds payable	(500,000)	(1,000,000)	500,000
Unamortized premium on bonds	(71,000)	(150,000)	79,000
Common stock	(350,000)	(150,000)	(200,000)
Additional paid-in capital	(430,000)	(375,000)	(55,000)
Retained earnings	(185,000)	(265,000)	80,000
Sales	(2,420,000)
Cost of sales	1,863,000
Selling and administrative expenses	220,000
Interest income	(14,000)
Interest expense	46,000
Depreciation	88,000
Loss on sale of equipment	7,000
Gain on extinguishment of bonds	(90,000)
Income tax expense	105,000
	$0	$0	$300,000

Additional Information

During year 10 equipment with an original cost of $50,000 was sold for cash, and equipment costing $125,000 was purchased.

On January 1, year 10, bonds with a par value of $500,000 and related premium of $75,000 were redeemed. The $1,000 face value, 10% par bonds had been issued on January 1, year 1, to yield 8%. Interest is payable annually every December 31 through year 20.

Probe's tax payments during year 10 were debited to Income Taxes Payable. Probe recorded a deferred income tax liability of $42,000 based on temporary differences of $120,000 and an enacted tax rate of 35% at December 31, year 9; prior to year 9 there were no temporary differences. Probe's year 10 financial statement income before income taxes was greater than its year 10 taxable income, due entirely to temporary differences, by $60,000. Probe's cumulative net taxable temporary differences at December 31, year 10, were $180,000. Probe's enacted tax rate for the current and future years is 35%.

60,000 shares of common stock, $2.50 par, were outstanding on December 31, year 9. Probe issued an additional 80,000 shares on April 1, year 10.

There were no changes to retained earnings other than dividends declared.

Prepare a statement of cash flows using the indirect method. You should also enter the following amounts:

Subtotals for each class of activity.

Net change in cash for the year.

Reconciliation to cash amounts.

Complete the following with a statement of cash flows using the indirect method.

Probe Co. STATEMENT OF CASH FLOWS For the Year Ending 12/31/Y10
	Cash Source (Use)
From Operating Activities
From Investing Activities
From Financing Activities