The comparative balance sheets and income statements for Vernon Company follow: Balance Sheets Assets Cash Accounts receivable As of December 31 Year 2 Year 1 $ 23,845 $ 2,909 1,550 930 Inventory Equipment Accumulated depreciation-equipment Land Total assets 6,590 18,571 (10,915) 6,178 40,351 (18,437) 21,061 10,561 $ 60,702 Liabilities and equity Accounts payable (inventory) $ 2,732 Long-term debt 2,990 Common stock 25,100 Retained earnings. 2,880 $ 42,492 $ 4,414 6,834 10,500 20,744 Total liabilities and equity $ 60,702 $ 42,492 Income Statement For the Year Ended December 31, Year 2 Sales revenue Cost of goods sold Gross margin Depreciation expense Operating income Gain on sale of equipment Loss on disposal of land Net income $ 34,610 (13,718) 20,892 (3,069) 17,823 550 (100) $ 18,273 Additional Data 1. During Year 2, the company sold equipment for $18,759; it had originally cost $28,800. Accumulated depreciation on this equipment was $10,591 at the time of the sale. Also, the company purchased equipment for $7,020 cash. 2. The company sold land that had cost $4,100. This land was sold for $4,000, resulting in the recognition of a $100 loss. Also, common stock was issued in exchange for title to land that was valued at $14,600 at the time of exchange. 3. Paid dividends of $9,137. Required Prepare a statement of cash flows using the indirect method. (Amounts to be deducted and cash outflows should be indicated by a minus sign.) VERNON COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities: Net income $ 18,273 Less: Increase/Decrease in current assets and current liabilities: + Increase in accounts receivable Decrease in accounts payable Increase in inventory Plus: Noncash charges 10 379 Cash flows from operating activities: Net income Less: Increase/Decrease in current assets and current liabilities: Increase in accounts receivable Decrease in accounts payable Increase in inventory Plus: Noncash charges $ 18,273 $ 18,273 Cash flows from investing activities: Cash flows from financing activities: 0 0 18,273 Ending cash balance $ 18,273 Schedule of noncash investing and financing activities