Cash Flow Statement (In Direct Method)

Net Income 118,995

Adjustments:
To reconcile net income to net cash provided
by operating activities

Add: Non-Cash Charges and Non-Business Exp

Less: Non-Business Income
Depreciation 61,625
Amortization of patents 25,000
Gain on sale of equipment -24,250
Deferred Taxes (Refer Note 2) 26730
Int Expenses 58750
147,855
Net changes in Working Capital
Add: Decrease in CA and Inc in CL
Less: Increase in CA and Dec in CL
Accounts receivable -70,030
Inventories:
Raw materials -20,450
Finished Goods -99,680
Prepaid insurance -65,000
Taxes payable -950
-256,110
Net cash from operating activities (A) 10,740
Cash flows from investing activities
Capital expenditures for P & E (520+425) -945,000
Proceeds from sale of equipment 215,500
Net cash used in investing activities (B) -729,500
Cash flows from financing activities
Proceeds from issuance of long term debt 510,000
Proceeds from issuance of short term debt 200,000
Dividends paid -10,000
Purchase of treasury stock -26,000
Int Expenses -58750
Net cash provided by financing activities (C) 615,250
Net decrease in cash (A)+(B)+(C) -103,510
Cash at beginning of the year 113,000
Cash at the end of the year 9,490
Note: 1. purchase of land (2.5) and a building (6) for
$850,000. These investments were partly
(8.5*50%=4.25) financed by the issue of a Notes
Payable to the seller of the land and building, there is
no cash involved in this transaction
Note:2. Deferred tax is a non-cash item