Question

Statement of Cash Flows (Indirect Method) The Towne Company’s income statement and comparative balance sheets as of December 31 of 2016 and 2015 follow:

TOWNE COMPANY Income Statement For the Year Ended December 31, 2016
Service Fees Earned		$317,000
Dividend and Interest Income		14,000
		$331,000
Wages and Other Operating Expenses	$285,000
Depreciation Expense	55,000
Franchise Amortization Expense	10,000
Loss on Sale of Equipment	7,000
Gain on Sale of Investments	(17,000)	340,000
Net Loss		$(9,000)

TOWNE COMPANY Balance Sheets
	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash	$43,000	$33,000
Accounts Receivable	13,000	18,000
Interest Receivable	-	4,000
Prepaid Expenses	16,000	10,000
Long-term Investments—Available for Sale	-	70,000
Fair Value Adjustment to Investments	-	10,000
Plant Assets	696,000	655,000
Accumulated Depreciation	(237,000)	(185,000)
Franchise	91,000	29,000
Total Assets	$622,000	$644,000
Liabilities and Stockholders’ Equity
Accrued Liabilities	$12,000	$14,000
Notes Payable	-	26,000
Common Stock ($10 par value)	595,000	535,000
Retained Earnings	35,000	59,000
Unrealized Gain on Investments	-	10,000
Treasury Stock	(20,000)	-
Total Liabilities and Stockholders’ Equity	$622,000	$644,000

During the year, the following transactions occurred:
1. Sold equipment for $9,000 cash that originally cost $19,000 and had $3,000 accumulated depreciation.
2. Sold long‑term investments that had cost $70,000 for $87,000 cash. Unrealized gains totaling $10,000 related to these investments had been recorded in earlier years. At year‑end, the fair value adjustment and unrealized gain account balances were eliminated.
3. Paid cash to extend the company’s exclusive franchise for another three years.
4. Paid off a note payable at the bank on January 1.
5. Declared and paid a $15,000 dividend.
6. Purchased treasury stock for cash.
7. Acquired land valued at $60,000 by issuing 6,000 shares of common stock.

Required
a. Compute the change in cash that occurred in 2016.
b. Prepare a statement of cash flows using the indirect method.

a. Change in Cash during 2016 $Answer AnswerIncreaseDecrease

b. Use a negative sign with cash outflow answers.

TOWNE COMPANY Statement of Cash Flows For Year Ended December 31, 2016
Cash Flow from Operating Activities
Net Loss		$Answer
Add (deduct) items to convert net income to cash basis
Depreciation		Answer
Franchise Amortization		Answer
Loss on Sale of Equipment		Answer
Gain on Sale of Investments		Answer
Accounts Receivable	AnswerIncreaseDecrease	Answer
Interest Receivable	AnswerIncreaseDecrease	Answer
Prepaid Expenses	AnswerIncreaseDecrease	Answer
Accrued Liabilities	AnswerIncreaseDecrease	Answer
Cash Provided by Operating Activities		Answer
Cash Flow from Investing Activities
Sale of Equipment		Answer
Sale of Investments		Answer
Extension of Franchise		Answer
Cash Provided by Investing Activities		Answer
Cash Flow from Financing Activities
Payment of Notes Payable		Answer
Payment of Dividends		Answer
Purchase of Treasury Stock		Answer
Cash Used by Financing Activities		Answer
Net in Cash AnswerIncreaseDecrease		Answer
Cash at Beginning of Year		Answer
Cash at End of Year		$Answer