The income statement for Morse Company for the year ending December 31, 2016 is shown in Exhibit 4.1 and balance sheets as of December 31, 2015 and 2016 are shown in Exhibit 4.2. The company sold property, plant and equipment (PP&E) with accumulated depreciation of $25,000 for $5,000 in cash.

Required: Prepare a statement of cash flows for 2016 using the indirect method. Make sure the statement is prepared in good form; that means all cash flow accounts are in the correct sections, with correct labels or headings.

EXHIBIT 4.1

MORSE ENTERPRISES

Income Statement

For the Year Ending December 31, 2017

2017

Sales

$250,000

Cost and expenses:

Cost of goods sold

148,000

Wage expense

30,000

Insurance expense

5,000

Depreciation expense

18,000

Total expenses

201,000

Operating income

49,000

Other (income) expense:

Loss on sale of equipment

(12,000)

Net income before taxes

37,000

Income taxes

11,000

Net income

$26,000

		EXHIBIT 4.2
		MORSE ENTERPRISES
		Balance Sheets
		For the Years Ending December 31, 2016 and 2017
			2016	2017
		Cash	$10,000	$35,000
		Accounts receivable	34,000	39,000
		Inventory	64,000	71,000
		Total current assets	108,000	145,000
		PPE	200,000	205,000
		Acumulated depreciation	(40,000)	(50,000)
		Book value	160,000	155,000
		Patents	75,000	75,000
		Total assets	$343,000	$375,000
		Accounts payable	$22,000	$15,000
		Common stock	265,000	285,000
		Retained earnings	56,000	75,000
		Total stockholders' equity	321,000	360,000
		Total liabilities and stockholders' equity	$343,000	$375,000