The 2014 comparative balance sheet and 2014 income statement of Byfield Co Ltd, have just been distributed at a meeting of the companys board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors.

Simple Things Industries Ltd.
Comparative Balance Sheet
December 31, 2014 and 2013
	2014	2013	Increase/(Decrease)
Assets
Cash	110,000	70,000	?
Accounts Receivable	300,000	325,000	?
Supplies	350,000	280,000	?
Prepaid expenses	35,000	28,000	?
Intangible assets	215,000	215,000	?
Equipment, net	1,200,000	980,000	?
Total Assets	2,210,000	1,898,000
Liabilities
Accounts payable	250,000	140,000	?
Accrued liabilities	210,000	215,000	?
Income tax payable	78,000	98,500	?
Long-term notes payable	602,000	725,000	?
Stockholders' Equity
Common Stock	410,000	330,000	?
Retained earnings	730,000	450,000	?
Treasury stock	(70,000)	(60,500)	?
Total liabilities and stockholders' equity	2,210,000	1,898,000

Income Statement
Year Ended December 31,2014
Revenues and gains:
Sales revenue	2,100,000
Gain on sale of Equipment	85,000
Total revenues and gains			2,185,000
Expenses
Cost of goods sold	900,000
Depreciation expense	150,000
Other operating expense	350,000
Total expenses			1,400,000
Income before income taxes			785,000
Income tax expense			210,000
Net Income			575,000
Notes
Acquisition of Equipment during 2014				540,000
Sale proceed from sale of Equipment				255,000
Receipt for issuance of notes payable				27,000
Payment for note payable				150,000
Dividend paid				295,000
Book value of equipment sold				170,000

Requirements

1. Reconstruct the companys comparative balance sheet for 2013/2014 using the information and compute and show the missing figures to include the appropriate sign as a positive or negative figure.

2. Which category of the statement of cash flow is considered as the most important? Why?

3. Prepare a complete statement of cash flows for 2014 using the indirect method using the information.