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Granite Surfaces specializes in making granite countertops. A new accounting clerk has compiled the following information to prepare the statement of cash flows for the year ended December 31, 2018.

• Net income for the year was $114,140.
• Depreciation expense was $15,300.
• Equipment was sold for a gain of $16,000. Cash proceeds from the sale were $36,000.
• Equipment was purchased for $250,000.
• Dividends of $50,000 were paid.
• Accounts receivable increased by $31,400.
• Merchandise inventory decreased by $38,700.
• Accounts payable increased by $41,100.
• Notes payable increased by $55,000.
• Stock was sold for $50,000 (also its book value).
• Cash balance on January 1, 2018 was $114,800.
• Cash balance on December 31, 2018 was $117,640.

The statement of cash flows the accounting clerk prepared is shown below.

Granite Surfaces
Statement of cash flows
For the Year Ended December 31, 2018
Cash Flow from Operating Activities
Net Income	$114,140
Adjustments to Reconcile Net Income to Net Cash
Provided (used) by Operating Activities
Depreciation Expense	15,300
Change in Operating Assets and Liabilities
increase in Accounts Receivable	31,400
decrease in Merchandise Inventory	(38,700)
Increase in Accounts Payable	41,100
Sale of Equipment	(250,000)
Net Cash provided (used) by Operating Activities		($50,760)
Cash flow from Financing Activities
proceeds from Notes Payable	55,000
Net Cash Provided (Used) by Investing Activities		55,000
Cash Flow from Financing Activities
Payments of Cash dividend	(50,000)
Proceeds from issuance of Common stock	50,000
Net Cash provided (used) by Financing activities		0
Net increase (decrease) in Cash		4,240
Cash at the beginning of the year		114,800
Cash at the end of the year		119,040

1. Identify the problems with the statement of cash flows that the accounting clerk prepared.

2. Prepare a corrected statement of cash flows.

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