(Prepare a cash flow statement, LO 5) Markham Ltd. was organized on September 1, 2004 with a cash investment of $700,000 by its shareholders. Markham arranged a long-term loan with a local bank for $500,000 and purchased a small office build- ing for $800,000. During its fiscal year ended August 31, 2005 Markham collected

$500,000 in cash from customers, paid $340,000 in cash for operating expenses, and paid $40,000 in cash dividends to its shareholders.

Required:

a. Classify each of the cash flows described above as operating, investing, or financing.

b. Organize the cash flows into a cash flow statement.

c. Explain what your cash flow statement tells you that an income statement does not.