Statement of Cash Flows – The following is a list of the items to be included in the preparation of the 2007 statement of cash flows for the Trone Company:
1. Extraordinary gain (net), $9,200
2. Proceeds from issuance of note, $25,000
3. Decrease in accounts receivable, $5,000
4. Payment for purchase of patent, $19,800
5. Increase in inventory, $6,700
6. Payment of dividends, $30,000
7. Decrease in accounts payable, $4,000
8. Proceeds from sale of investments, $8,500
9. Amortization of premium on bonds payable, $2,100
10. Net income, $49,200
11. Common stock exchanged for land, $14,000
12. Payment for purchase of equipment, $39,400
13. Loss on sale of investments, $4,800
14. Decrease in deferred taxes payable, $3,600
15. Proceeds from issuance of preferred stock, $52,800
16. Payment to retire bonds, $37,800
17. Depreciation expense, $10,700
18. Ending cash balance, $22,100
Required
1. Prepare the statement of cash flows.
2. What would have happened if the company had not issued the note during 2007? How did the issuance of the note affect the company’s debt ratio (discussed in Chapter 6) at the end of 2007?