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Prepare a Statement of Cash Flows, Indirect Method. Madison, Inc.s most recent balance sheet, income statement, and other important information for 2017 are presented as follows.

Additional data for 2017 are as follows:

Sold equipment with a book value of $30,000 (= $40,000 cost $10,000 accumulated depreciation) for $28,000 cash

Purchased equipment for $96,000 cash

There were no sales of long-term investments (Hint: Solve for the purchase of long-term investments.)

Issued bonds for $16,000 cash

Repurchased common stock (treasury shares) for $45,000 cash

Declared and paid $12,000 in cash dividends

Required:

A) Use the four steps described in the chapter to prepare a statement of cash flows for the year ended December 31, 2017, using the indirect method. Refer to the format presented in Figure 12.8 Statement of Cash Flows (Home Store, Inc.).

B) Briefly describe the major changes in cash identified in the statement of cash flows.

(only need B)

Home Store, Inc. Statement of Cash Flows for the Year Ended December 31, 2016 Cash flows from operating activities Net income Adjustments (to convert net income to cash provided by operating activities) $ 124,000 Add back depreciation expense Add back loss on sale of equipment Increase in accounts receivable Increase in merchandise inventory Decrease in prepaid expenses Increase in accounts payable Decrease in income tax payable 24,000 6,000 (60,000) (66,000) 2,000 1,000 (9,000) Step 1 Cash provided by operating activities $ 22,000 Cash flows from investing activitiesb Purchase of equipment Proceeds from sale of equipment Purchase of long-term investments (67,000) 5,000 (12,000) Step 2 Cash used by investing activities (74,000) Cash flows from financing activities Principal payment on bonds Proceeds from issuance of common stock Payment of cash dividends (18,000) 4,000 (32,000) Step 3 Cash used by financing activities (46,000) Net decrease in cash Cash at beginning of yeard Cash at end of yeard $ (98,000) 130,000 $ 32,000 Step 4

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