The income statement and comparative balance sheets for Mug Shots, Inc., (a photography studio) are presented below.

MUG SHOTS, INC.			MUG SHOTS, INC.
Income Statement			Comparative Balance Sheets
For Month Ended December 31				Dec. 31	Nov. 30
Revenue			Assets
Sales revenue			Cash	$12,840	$6,000
Expenses		$37,200	Accounts receivable	3,000
Cost of goods sold	$20,040		Inventory	38,760	28,800
Wages expense	5,640		Prepaid rent	9,000	10,800
Interest expense	360		Equipment	36,000	21,600
Advertising expense	2,160		Accumulated depreciation	-840	0
Rent expense	1,800		Total assets	$98,760	$67,200
Depreciation expense	840		Liabilities
Total expenses		30,840	Accounts payable	$30,000	$28,800
Income before taxes		6,360	Interest payable	360
Income tax expense		2,226	Wages payable	2,640
Net income		$4,134	Income tax payable	2,226
			Unearned revenue	600
			Notes payable	36,000	14,400
			Equity
			Common stock	24,000	24,000
			Retained earnings	2,934	0
			Total liabilities and equity	$98,760	$67,200

Use the information in these financial statements and the frameworks in Exhibits 4.5 and 4.6 to compute Mug Shots cash flow from operating activities using the direct method.

Note: Do not use a negative sign with any of your answers.

MUG SHOTS, INC. Computation of Cash Flow from Operating Activities For Month Ended December 31

	Net			Cost of		Wage		Interest		Advertising		Rent		Depreciation		Income tax
	income	=	-	goods sold	-	expenses	-	expense	-	expense	-	expense	-	expense	-	expense
	Answer			Answer		Answer		Answer		Answer		Answer		Answer		Answer
Adjustments:
Add depreciation expense													+	Answer
														Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A
Subtract (add) nonoperating gains (losses)
Subtract the change in operating assets		-	-	Answer	-	Answer	-	Answer	-	Answer	-	$-1,800	-	Answer	-	Answer
(operating investments)				Change in		Change in		Change in		Change in		Change in		Change in		Change in
			Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A	Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A
Add the change in operating liabilities		+	+	Answer	+	Answer	+	Answer	+	Answer	+	Answer	+	Answer	+	Answer
(operating financing)				Change in		Change in		Change in		Change in		Change in		Change in		Change in
				Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A		Answer: accounts payable accounts receivable depreciation expense equipment income tax payable interest payable inventory notes payable prepaid rent unearned revenue wages payable N/A
	Answer	=	-	Answer	-	Answer	-	Answer	-	Answer	-	Answer	-	Answer	-	Answer
	Cash from			Payments for		Payments		Payments		Payments		Payments				Payments
	operations	=	-	merchandise	-	for wages	-	for interest	-	for advertising	-	for rent	-