Question

Presentedbelow are the 2011 income statement and comparative balance
sheet for Siegfried & Royce.
Siegfried & Royce
Income Statement
For the Year Ended December 31, 2011
	($ inthousands)
Sales revenue		$12,500
Operating expenses:
Cost of goods sold	7300
Depreciation	400
Rent	250
Administrative and other	2200
Total operating expenses		10,150
Income before income taxes		2,350
Income tax expense		940
Net income		$1,410
Balance Sheet information ($ in thousands)	Dec. 31, 2011	Dec. 31, 2010
Assets:
Cash	$3,280	$1,300
Accounts receivable	1,250	980
Inventory	980	900
Prepaid rent	150	100
Plant & equipment	3,000	2,600
Less: Accumulated depreciation	-1,200	-800
Totalassets	$7,460	$5,080
Liabilities and shareholders’ equity:
Accounts payable	$500	$580
Payables for administrative and other expenses	650	700
Income taxes payable	450	350
Note payable (due 12/31/2012)	2,500	2,000
Common stock	1,500	1,000
Retained earnings	1,860	450
Totalliabilities and shareholders’ equity	$7,460	$5,080

Required: Prepare a Statement of Cash Flows using the directmethod for operating activities. Assume that all purchases andsales of inventory are on account, and that there are noanticipated bad debts for accounts receivable.

TIP: Use T accounts for the pertinent items toisolate the information for the statement