Using transaction data to prepare a statement of cash flows—Direct method Greenstein Company engaged in the following transactions during 2012. The beginning cash balance was $86,000 and ending cash balance was $123,100.

1. Sales on account were $548,000. The beginning Accounts Receivable balance was $128,000 and the ending balance was $90,000.

2. Salaries expense was $232,000. The beginning Salaries Payable balance was $16,000 and the ending balance was $8,000.

3. Other operating expenses were $236,000. The beginning Other Operating Expenses Payable balance was $16,000 and the ending balance was $10,000.

4. Recorded $30,000 of depreciation expense. The beginning and ending balances in the Accumulated Depreciation account were $12,000 and $42,000, respectively

5. The Equipment account had beginning and ending balances of $44,000 and $56,000, respectively. There were no sales of equipment during the period.

6. The beginning and ending balances in the Notes Payable account were $44,000 and $36,000, respectively. There were no notes payable issued during the period.

7. There was $4,600 of interest expense reported on the income statement. The beginning and ending balances in the Interest Payable account were $8,400 and $7,500, respectively.

8. The beginning and ending Merchandise Inventory account balances were $22,000 and $29,400, respectively. The company sold merchandise with a cost of $83,600. The beginning and ending balances of Accounts Payable were $8,000 and $6,400, respectively.

9. The beginning and ending balances of Notes Receivable were $100,000 and $60,000, respectively. Notes receivable result from long-term loans made to creditors. There were no loans made to creditors during the period.

10. The beginning and ending balances of the Common Stock account were $120,000 and $160,000, respectively. The increase was caused by the issue of common stock for cash.

11. Land had beginning and ending balances of $24,000 and $14,000, respectively. Land that cost $10,000 was sold for $6,000, resulting in a loss of $4,000.

12. The tax expense for the period was $6,600. The Tax Payable account had a $2,400 beginning balance and a $2,200 ending balance.

13. The Investments account had beginning and ending balances of $20,000 and $60,000, respectively. The company purchased investments for $50,000 cash during the period, and investments that cost $10,000 were sold for $22,000, resulting in a $12,000 gain.

Required

a. Determine the amount of cash flow for each item and indicate whether the item should appear in the operating, investing, or financing activities section of a statement of cash flows. If an item does not affect the cash flow statement, make a statement indicating that the cash flow statement will not be affected. Assume Greenstein Company uses the direct method for showing net cash flow from operating activities.

b. Prepare a statement of cash flows based on the information you developed in Requirement α.