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 $700,000 Cost of goods sold $440,000 Wages and other operating expenses 95,000 Depreciation expense 22,000 Amortization expense 2,000 Interest expense 7,000 Income tax expense 36,000 Loss on bond retirement 3,000 605,000 Net income $95,000 Assets Cash Accounts receivable Inventory DAIR COMPANY Balance Sheets Prepaid expenses Plant assets Accumulated depreciation Intangible assets Total assets Liabilities and Stockholders' Equity Dec. 31, 2011 Dec. 31, 2010 $ 50,000 $ 22,000 53,000 50,000 103,000 111,000 12,000 9,000 358,000 329,000 (87,000) (84,000) 48,000 50,000 $ 537,000 $ 487,000 Accounts payable Interest payable $ 35,000 $ 26,000 2,000 7,000 Income tax payable 7,000 8,000 Bonds payable 65,000 118,000 Common stock 257,000 228,000 Retained earnings 171,000 100,000 Total liabilities and equity $ 537,000 $ 487,000