Cash Flow Corporation

Statement of Cash Flows (DIRECT METHOD)

For the year ended December 31, 2001

Cash flows from operating activities:

Collections from customers $ 277,400
Collections from franchisees 100,000
Collections for interest 18,000
Collections for rent 15,000
Payments to merchandise suppliers (185,000)
Payments to employees (46,000)
Payments for insurance (19,000)
Payments for interest (29,000)
Payments for income taxes (25,000)
Net cash provided by operating activities 106,400

Cash flows from investing activities:

Purchase of land (280,000)
Purchase of equipment (50,000)
Sale of equipment 65,000
Net cash used by investing activities (265,000)

Cash flows from financing activities:

Payment of dividends (28,400)
Issuance of bonds 150,000
Issuance of common stock 65,000
Net cash provided by financing activities 186,600

Net increase in cash 28,000

Cash at beginning of year 70,000
Cash at end of year $ 98,000

Investing and financing activity not affecting cash:

Purchased land by issuing shares of common stock $ 35,000

Reconciliation of net income to net cash provided by

operating activities:
Net income $ 56,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 40,000
Amortization expense 10,000
Gain on sale of equipment (10,000)
Increase in net accounts receivable (21,000)
Decrease in interest receivable 3,000
Increase in inventories (30,000)
Increase in prepaid insurance (12,000)
Decrease in accounts payable (10,000)
Decrease in salaries payable (9,800)
Increase in income taxes payable 5,000
Decrease in unearned rent revenue (15,000)
Increase in unearned franchise fees 100,000
Net cash provided by operating activities $ 106,400