Statement of Cash Flows (Direct Method) Dair Company's income statement and comparative balance sheets follow. DAIR COMPANY Income Statement For Year Ended December 31,2011 Sales Cost of goods sold Wages and other operating expenses Depreciation expense Amortization expense Interest expense Income tax expense Loss on bond retirement Net income 700,000 440,000 95,000 21,000 7,000 6,000 37,000 ,000 610,000 $90,000 DAIR COMPANY Balance Sheets Dec. 31, 2011 Dec. 31, 2010 Assets Cash Accounts receivable Inventory Prepaid expenses Plant assets Accumulated depreciation Intangible assets Total assets Liabilities and Stockholders' Equity Accounts payable Interest payable Income tax payable Bonds payable Common stock Retained earnings Total liabilities and equity $20,000 48,000 113,000 8,000 329,000 (84,000) 50,000 $506,000 484,000 $33,000 53,000 103,000 12,000 348,000 (86,000) 43,000 $32,000 4,000 3,000 55,000 252,000 160,000 26,000 7,000 8,000 119,000 228,000 96,000 506,000 484,0 During 2011, the company sold for $17,000 cash old equipment that had cost 36,000 and had $19,000 accumulated depreciation. Also in 2011, new equipment worth $55,000 was acquired in exchange for $55,000 of bonds payable, and bonds payable of $119,000 were retired for cash at a loss. A $26,000 cash dividend was declared and paid in 2011. Any stock issuances were for cash (a) Compute the change in cash that occurred in 2011 Cash, December 31, 2011 Cash, December 31, 2010 Cash increase during 2011 (b) Prepare a 2011 statement of cash flows using the direct method. Use one cash flow for "cash paid for wages and other operating expenses." Accounts payable relate to inventory purchases only. DAIR COMPANY Statement of Cash Flows For Year Ended December 31, 2011 Cash Flows from Operating Activities Cash received from customers Cash paid for merchandise purchased Cash paid for wages &other operating expenses Cash paid for interest Cash paid for income taxes Net cash provided by operating activities Cash flows from investing activities Sale of equipment Cash Flows from Financing Activities Retirement of bonds payable ssuance of common stock Payment of dividends Net cash used by financing activities Net increase(decrease) in cash Cash at beginning of year Cash at end of year (c) Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions (1) Supplemental Cash Flow Disclosures Cash Paid for Interest Cash Paid for Income Taxes (2) Schedule of Noncash Investing and Financing Activities Issuance of Bonds Payable to Acquire Equipment