North Mountain Nursery, Inc.

: Statement of Cash Flow

Income Statement for the Year Ended December 31, 2006

Revenues 2,181,250
Cost of Merchandise Sold 1,110,600
Gross Margin 1,070,650
Operating Expense
Rent Expense 120,600
Utilities Expense 60,350
Phone Expense 6,100
Salary and wage expense 650,000
Depreciation Expense 20,000
Marketing Expense 41,000
Total operating expense 898,050
Operating income 172,600
Interest expense 9,000
Income before taxes 163,600
Income-tax expense 57,300
Net Income 106,300

North Mountain Nursery, Inc.: Statement of Cash Flow

Balance Sheet for the Year Ended December 31, 2005, and December 31, 2006

December 31, 2005 December 31, 2006 Delta

Current assets:
Cash 47,950 45,600 (2,350)
Accounts receivable 655,000 700,000 45,000
Inventory 234,700 250,000 15,300
Total current assets 937,650 995,600 57,950
Equipment 160,000 190,000 30,000
Total assets 1,097,650 1,185,600 87,950
Current liabilities
Accounts payable 510,000 530,000 20,000
Utilities payable 19,000 18,250 (750)
Salary and wage payable 9,750 10,000 250
Income tax payable 7,100 7,250 150
Total current liabilities 545,850 565,500 19,650
Noncurrent liabilities:
Loan payable 172,000 154,000 (18,000)
Total liabilities 717,850 719,500 1,650
Owners' equity
Capital stock 240,000 240,000 -
Retained Earnings 139,800 226,100 86,300
Total liabilities and owners' equity 1,097,650 1,185,600 87,950

Implied Dividends: 20,000

North Mountain Nursery, Inc.: Statement of Cash Flow

Statement of Cash Flows for the Year Ended December 31, 2006
(prepared using the indirect method)

Operating Activites
Net Income 106,300
+ Depreciation Expense 20,000
- Increase in Accounts Receivable (45,000)
- Increase in Inventory (15,300)
+ Increase in Accounts Payable 20,000
+ Increase in Taxes Payable 150
+ Increase in Utilities Payable (750)
+ Increase in salaries and wages payable 250
- Deferred Revenue 0
Cash Flow from Operating Activities 85,650

Investing Activities
Purchase of Equipment (75,000)
Sale of Equipment 25,000
Cash Flow from Investing Activities (50,000)

Financing Activities
Notes Payable (18,000)
Proceeds from loan
Dividends (20,000)
Cash Flow from Financing Activities (38,000)

Change in Cash (2,350)