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Attached are the comparative balance sheets for Verdi Company at December 31, 20X1 and 20X0 as well as the income statement for the year ending December 31, 20X1. In addition, the company had no sales of plant and equipment during the year, and the company paid dividends to stockholders during the year. REQUIRED: (1) Prepare Verdi Company's statement of cash flows, in proper form, for the year ending December 31, 20X1, using the indirect method. Be sure to include a schedule of noncash investing and financing activities, if appropriate. In which of the three categories of activities did Verdi use the majority of its cash during 20X1? What does your answer to the previous question tell you about Verdi Company? From which of the three types of activities did Verdi obtain the majority of its cash during 20X1? 20X0 VERDI COMPANY COMPARATIVE BALANCE SHEETS (IN THOUSANDS) AT DECEMBER 31, 20X1 AND 20X0 20X1 ASSETS SIST Cash 1,618 $ Accounts Receivable 1,925 Merchandise Inventory 1,070 Prepaid Expenses 188 Buildings - 4,818 Accumulated Depreciation, Buildings 361) Equipment 1,434 Accumulated Depreciation, Equipment ( 141)| ( TOTAL ASSETS 10,551 S 3 1,220 2,112 966 149 ,292 300) ,145 100) 8,484 1 S LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable Notes Payable, Short Term Notes Payable, Long Term Common Stock, No par value Retained Earnings TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,818 900 2,500 3,390 1,943 1,686 1,100 2,000 2,041 1,657 10,551 8,484 $ 7 11,228 ,751 3,477 VERDI COMPANY INCOME STATEMENT (IN THOUSANDS) FOR YEAR ENDING DECEMBER 31, 20X1 Sales Revenue Cost of Goods Sold 1 Gross Margin From Sales Operating Expenses: Depreciation Expense, Buildings and Equipment S 102 | Other Selling and Administrative 2,667 Total Operating Expenses a . Income Before Interest and Income Taxes Interest Expense Income Before Income Taxes Income Tax Expense Net Income 2,769 708 168 540 114 426

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