#### Example 2--Statement of Cash Flows

Example 2:
This example continues from Example 1.  During the year Shiner Corporation paid dividends of \$18,000. Shiner also issued \$150,000 in bonds and purchased land, a building, and some equipment for cash.

 Comparative Balance Sheet Shiner Corporation Assets Dec 31, 1996 Dec 31, 1995 Cash \$37,000 \$49,000 Accounts Receivable \$26,000 \$36,000 Prepaid Expenses \$6,000 \$0 Land \$70,000 \$0 Building \$200,000 \$0 Accumulated Depreciation \$11,000 \$189,000 \$0 Equipment \$68,000 \$0 Accumulated Depreciation \$10,000 \$58,000 \$0 Total Assets \$386,000 \$85,000 Liabilities and Stockholder Equity Accounts Payable \$40,000 \$5,000 Bonds Payable \$150,000 \$0 Common Stock \$60,000 \$0 Retained Earnings \$136,000 \$20,000 Total Liabilities and Stockholder Equity \$386,000 \$85,000

 Income Statement Shiner Corporation Revenue \$492,000 Operating Expenses \$269,000 Depreciation \$21,000 \$290,000 Income before Income Taxes \$202,000 Income Tax Expense \$68,000 Net Income \$134,000

 Step 1: Change in Cash: Dec 31, 96 Balance minus Dec 31, 95 balance (\$37,000-\$49,000)=(\$12,000)
 Step 2: Net Cash flow from Operating Activities Direct Method: Cash collected from Revenues \$502,000 Cash payments for Expenses \$240,000 Income before Income Taxes \$262,000 Cash payment of taxes \$68,000 Net cash flow from Operating Activities \$194,000 Comments: The \$502,000 was derived by adding the change in Accts Receivable to Revenues for the period. The cash payments for expenses was derived by adding the increase in prepaid assets and subtracting the change in Accts Payable. Indirect Method: Net Income \$134,000 Adjustments to reconcile net income to net cash Accts Receivable decrease \$10,000 Prepaid Expense (\$6,000) Accts Payable Increase \$35,000 Depreciation \$21,000 \$60,000 Net cash flow from Operating Activities \$194,000
 Step 3: Investing Activities: Land Purchase \$70,000 Building Purchase \$200,000 Equipment Purchase \$68,000 Financing Activities : Dividend payment to shareholders \$18,000 Issuance of Bonds Payable \$150,000

 Statement of Cash Flows Cash Flow from Operating Activities Net Income \$134,000 Adjustments to reconcile net income to net cash Accts Receivable decrease \$10,000 Prepaid Expense increase (\$6,000) Accts Payable Increase \$35,000 Depreciation \$21,000 \$60,000 Net cash provided from Operating Activities \$194,000 Investing Activities Land Purchase (\$70,000) Building Purchase (\$200,000) Equipment Purchase (\$68,000) (\$338,000) Financing Activities Dividend payment to shareholders (\$18,000) Issuance of Bonds Payable \$150,000 \$132,000 Net Decrease in Cash (\$12,000) Cash Jan 1, 1996 \$49,000 Cash Dec 31, 1996 \$37,000