The following balances are available for Madison Company:

Bonds were issued during 2012 at face value, and plant and equipment were acquired for cash. Depreciation expense for the year was $50,000. A net loss of $21,800 was reported.
Required
1. Prepare a statement of cash flows for 2012 using the indirect method in the Operating Activities section.
2. Briefly explain how Madison was able to increase its cash balance during a year in which it incurred a net loss.

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December 31 2012 2011 Cash Accounts receivable Inventory Prepaid rent Land Plant and equipment Accumulated depreciation $ 12,000 $ 10,000 12,000 7,000 1,000 75,000 200,000 150,000 (75,000)25,000) $231,200 $230,000 $ 15,000 S 15,000 2,000 22,500 5,000 50,000 100,000 100,000 40,500 $231,200 $230,000 10,000 8,000 1,200 75,000 Totals Accounts payable Income taxes payable Short-term notes payable Bonds payable Common stock Retained eanings 2,500 20,000 18,700 Totals