1. Cash flow information: Direct and indirect methods The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company's current accounts: 20X5 20X4 Increase / Decrease) Current assets Cash $55,400 $35,200 $20,200 Accounts receivable (net) 83,800 88,000 -4,200 Inventory 243,400 233,800 9,600 Prepaid expenses 25,400 24,200 1,200 Current liabilities Accounts payable $123,600 $140,600 ($17,000) Taxes payable 43,600 49,200 -5,600 Interest payable 9,000 6,400 2,600 Accrued liabilities 38,800 60,400 -21,600 Note payable 44,000 — 44,000 The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows. SIGN GRAPHICS INC. Income Statement for the Year Ended December 31, 20x5 Sales $713,800 Less: Cost of goods sold 323,000 Gross profit $390,800 Less: Selling & administrative expenses $186,000 Depreciation expense 17,000 Interest expense 27,000 230,000 Add: gain on sale of land $160,800 21,800 Income before taxes $182,600 Income taxes 36,800 Net income $145,800 Other data: 1. Long-term investments were purchased for cash at a cost of $74,600. 2. Cash proceeds from the sale of land totaled $76,200. 3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock. 4. A long-term note of $49,400 was repaid. 5. Twenty thousand shares of common stock were issued at $5.19 per share. 6. The company paid cash dividends amounting to $128,600. Instructions: a. Prepare the operating activities section of the company's statement of cash flows, assuming use of: 1. The direct method. 2. The indirect method. b. Prepare the investing and financing activities sections of the statement of cash flows. .

1. 1.
Cash flow information: Direct and indirect methods
The comparative year-end balance sheets of Sign Graphics, Inc.,
revealed the following activity in the company's current
accounts:
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
-4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200

2. Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
-5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
-21,600
Note payable
44,000
—
44,000

3. The accounts payable were for the purchase of merchandise.
Prepaid expenses and accrued liabilities relate to the firm's
selling and administrative expenses. The company's condensed
income statement follows.
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20x5
Sales
$713,800
Less: Cost of goods sold

4. 323,000
Gross profit
$390,800
Less: Selling & administrative expenses
$186,000
Depreciation expense
17,000

5. Interest expense
27,000
230,000
Add: gain on sale of land
$160,800
21,800

6. Income before taxes
$182,600
Income taxes
36,800
Net income
$145,800
Other data:
1.

7. Long-term investments were purchased for cash at a cost of
$74,600.
2.
Cash proceeds from the sale of land totaled $76,200.
3.
Store equipment of $44,000 was purchased by signing a short-
term note payable. Also, a $150,000 telecommunications system
was acquired by issuing 3,000 shares of preferred stock.
4.
A long-term note of $49,400 was repaid.
5.
Twenty thousand shares of common stock were issued at $5.19
per share.
6.
The company paid cash dividends amounting to $128,600.
Instructions:
a.
Prepare the operating activities section of the company's
statement of cash flows, assuming use of:
1.
The direct method.
2.
The indirect method.
b.
Prepare the investing and financing activities sections of the

8. statement of cash flows.