The following financial statements were furnished by Patton Company:

Patton Company
Income Statement
For the Year Ended November 30, 2011
Sales .................$40,700
Less cost of goods sold ........... (13,200)
Gross margin ............... 27,500
Less wage expense ............(10,600)
Less other operating expenses ....... (1,130)
Less depreciation expense ..........(3,560)
Net income (loss) ............$12,210
In 2011, Patton purchased equipment for $25,000 and sold some equipment for its book value (i.e., no gain or loss resulted).

Required
a. Prepare a statement of cash flows using the indirect method.
b. Prepare the operating portion of Patton’s cash flow statement using the directmethod.

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Patton Company Balance Sheets As of December 31,2010 and 2011 2010 2011 Assets Cash Accounts receivable Inventory Prepaid expenses Plant and equipment Accumulated depreciation $15,500 5,800 8,700 1,340 42,200 $17,000 6,400 10,000 2,500 52,500 (8,200) $80,200 Total assets Liabilities and Equity Accounts payable (all relate to inventory purchases) Accrued wages payable Common stock Retained earnings 6,300 1,650 37,000 35,250 $66,340 80,200 5,100 1,200 37,000 23,040 Total liabilities and equity