Driftwood Shipbuilders entered into the following transactions during 1997. 1. Sold $6,000 of no-par common stock. 2. Purchased $6,000 of inventory on account. 3. Purchased new equipment for $5,000 in cash. 4. Collections on accounts receivable totaled $10,000. 5. Made payments to suppliers of $5,000. 6. Declared and paid dividends of $2,000. 7. Paid rent of $6,000 for the last six months of 1997 and $6,000 for the first six months of 1998. 8. Made sales totaling $100,000: $35,000 on account and the remainder for cash. 9. Paid $40,000 in cash for miscellaneous expenses. 10. Sold investments with a cost of $20,000 for $25,000. REQUIRED:

a. Prepare journal entries for each transaction.

b. Prepare a Cash T-account and post all transactions affecting cash to the account. Assume a beginning cash balance of $25,000.

c. Prepare a statement of cash flows (direct method) from the Cash T-account.