Kate has just completed her first year running Kate’s Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate provides you with the year-end income statement and balance sheet and asks that you prepare a statement of cash flows for Kate’s Cards. Additional information: 1. There were no disposals of equipment during the year. 2. Dividends in the amount of $1,300 were paid in cash during the year. 3. Prepaid expenses relate to operating expenses. Required a. Prepare a statement of cash flows for Kate’s Cards for the year ended August 31 using the in- direct method. Hint: Since this was Kate’s first year of operations, the beginning balance sheet account balances were zero. b. Prepare a statement of cash flows for Kate’s Cards for the year ended August 31 using the direct method. (Appendix 12A)    KATE’S CARDS Income Statement Year Ended August 31 Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $185,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,000 Operating expenses Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Consulting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,850 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,400 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,250 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,100 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,900 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,600 KATE’S CARDS Balance Sheet As of August 31 Assets Current assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . $17,400 Accounts receivable . . . . . . . . . . . 11,000 Inventory . . . . . . . . . . . . . . . 16,000 Prepaid insurance. . . . . . . . 1,000 Total current assets . . . . . . . . . . . . . . . 45,400 Equipment . . . . . . . . . . . . . . .  . . . . 17,500 Accumulated depreciation . . . . .. . . . . . . . . . (3,250) Total assets. . . . . . . . . . . . . . .. . . . . . . . . . $59,650 Liabilities Current liabilities Accounts payable . . . . . . . . . . . $ 6,200 Unearned revenue . . .  . . . . 1,250 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 1,900 Total current liabilities . . . . . . . . . . . . . . 9,350 Note payable. . . . . . . . . . . . . 15,000 Total liabilities . . . . . . . . . . . . . . . . 24,350 Stockholders’ equity Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 500 Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,500 Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,300 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,300 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,650