The comparative year-end balance sheets of Sign Graphics Inc. revealed the following activity in the company’s current accounts:

1. Cash flow information: Direct and indirect methodsThe comparative year-end balance sheets of Sign Graphics Inc. revealed the following activity in the company’s current accounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              20X520X4Increase
   (decrease)Current assets  Cash$ 55,400$ 35,200$ 20,200  Accounts receivable (net)86,80088,000(4,200)  Inventory246,400233,8009,600  Prepaid expenses25,40024,2001,200Current liabilities  Accounts payable$ 126,600$140,600$(17,000)  Taxes payable46,60049,200(5,600)  Interest payable9,0006,4002,600  Accrued liabilities38,80060,400(21,600)  Note payable44,000—44,000The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to thefirm’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 $728,000 Less: Cost of goods sold   323,000 Gross profit $390,800 Less: Selling & administrative expenses$186,000  Depreciation expense17,000  Interest expense27,000  230,000 Add: Gain on sale of land $160,800    21,800 Income before taxes $182,600 Income taxes 36,800 Net income $160,000Other data:
   1. Long-term investments were purchased for cash at a cost of $77,600.      
   2. Cash proceeds from the sale of land totaled $79,200.      
   3. Store equipment of $47,000 was purchased by signing a short-term note payable. 
   4. Also, a $153,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.      
   5. A long-term note of $50,900 was repaid.      
   6. 21,500 shares of common stock were issued at $5.19 per share.      
   
   
   solutionsPrepare the operating activities section of the statement of cash flows by using the direct method.
   Cash collected
   Less cash paid for:
   Inventory
       Selling & administrative 
       Interest expense 
       Income taxes 
   Net cash provided by operating activities
   
   
   Prepare the operating activities section of the statement of cash flows by using the indirect method.
   Net income
   Accounts receivable 
   Inventory
   Prepaid expenses 
         Accounts payable 
         Taxes payable 
         Interest payable 
         Accrued liabilities 
   Gain on sale of land
   Depreciation
   Net cash provided by operating activities
   
   
   Prepare the investing and financing activities sections of the statement of cash flows.
   
   
   Cash flows from investing activities
   
   
   Purchase of long-term investments
   Proceeds from sale of land
   Net cash provided by investing act.
   
   
   Cash flows from financing activities
   Repayment of long-term note
   Issuance of common stock*
   Dividends paid
   Net cash used by financing activities
   * 20,000 shares X $5.19 = $103,800
   

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