STATEMENT OF CASH FLOWS (YOU MAY USE EITHER THE DIRECT OR THE INDIRECT METHOD YOU MUST INDICATE AT THE TOP OF YOUR SOLUTION WHICH METHOD YOU ARE USING)

Eyjafjallajkull Company

Comparative Balance Sheet

December 31

2017 2016

Assets

Cash $ 70,000 $ 35,000

Accounts receivable 82,000 53,000

Inventories 120,000 132,000

Prepaid expenses 19,000 25,000

Investments 80,000 65,000

Plant assets 310,000 250,000

Accumulated depreciation (65,000) (60,000)

Total $616,000 $500,000

Liabilities and Stockholders' Equity

Accounts payable $ 85,000 $ 75,000

Accrued expenses payable 22,000 24,000

Bonds payable 130,000 150,000

Common stock 245,000 170,000

Retained earnings 134,000 81,000

Total $616,000 $500,000

Eyjafjallajkull Company

Income Statement

For the Year Ended December 31, 2017

Sales $480,000

Less:

Cost of goods sold $290,000

Operating expenses (excluding depreciation) 60,000

Depreciation expense 17,000

Income taxes 15,000

Interest expense 13,000

Loss on disposal of plant assets 8,000 403,000

Net income $ 77,000

Additional information:

1. New plant assets costing $85,000 were purchased for cash in 2017.
2. Old plant assets costing $25,000 were sold for $5,000 cash when book value was $13,000.
3. Bonds with a face value of $20,000 were converted into $20,000 of common stock.
4. A cash dividend of $24,000 was declared and paid during the year.
5. Accounts payable pertain to merchandise purchases.

Instructions

Prepare a statement of cash flows for the year using either the direct method OR the indirect method.