The comparative balance sneets and income statements for Solomon Company follow: Balance Sheets As of December 31 Year 2 Year 1 Assets $ 24,772 Cash 2,820 1,408 5,916 44,337 (18,743) 9,231 Accounts receivable Inventory Equipment Accumulated depreciation-equipment 2,347 6,310 20,507 (9,574) 16,061 $ 60,423 Land $ 44,969 Total assets Liabilities and equity Accounts payable (inventory) Long-term debt Common stock $ 2,730 $ 4,410 6,044 10,500 2,644 22,100 32,949 Retained earnings 24,015 $ 44,969 $ 60,423 Total liabilities and equity Income Statement For the Year Ended December 31, Year 2 $ 34,390 (13,631) 20,759 (3,520) Sales revenue Cost of goods sold Gross margin Depreciation expense Operating income Gain on sale of equipment Loss on disposal of land 17,239 700 (70) $ 17,869 Net income Additional Data 1. During Year 2, the company sold equipment for $18,811; it had originally cost $30,800. Accumulated depreciation on this equipment was $12,689 at the time of the sale. Also, the company purchased equipment for $6,970 cash. 2. The company sold land that had cost $4,770. This land was sold for $4,700, resulting in the recognition of a $70 loss. Also, common stock was issued in exchange for title to land that was valued at $11,600 at the time of exchange. 3. Paid dividends of $8,935. 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.) SOLOMON COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities: Net income 17,869 Less: Increase/Decrease in current assets and current liabilities: Increase in accounts receivable (939) Increase in inventory (394) (1,680) Decrease in accounts payable Plus: Noncash charges Depreciation expense 3,520 Plus: Loss on disposal of land 70 Less: Gain on sale of equipment (700) liabilities: (939) (394) Increase in accounts receivable Increase in inventory Decrease in accounts payable (1,680) Plus: Noncash charges Depreciation expense 3,520 Plus: Loss on disposal of land 70 Less: Gain on sale of equipment (700) Net cash inflow from operating activities 17,746 Cash flows from investing activities: Proceeds from sale of land Paid to purchase equipment Proceeds from sale of equipment Net cash inflow from investing activities Cash flows from financing activities: Repayment of debt Paid for dividends Net cash outflow from financing activities Net increase in cash 17,746 Plus: Beginning cash balance 17,746 Ending cash balance Schedule of noncash investing and financing activities: Issued common stock for land