Panzarella Corporation's current year income statement, comparative balance sheets, and additional information follow. For the year, all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment taxes. Assets Cash Accounts receivable Inventory Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable Income taxes payable Total current liabilities PANZARELLA CORPORATION Comparative Balance Sheets December 31 Equity Common stock, $2 par value Paid-in capital in excess of par value, common stock Retained earnings Total liabilities and equity PANZARELLA CORPORATION Income Statement For Year Ended December 31. Sales Cost of goods sold Gross profit Operating expenses Depreciation expense other expenses Income before taxes Income taxes expense Net income $75,000 860,000 Current Year $ 655,000 181,000 665,000 1,501,000 440,000 (208,000) $ 1,733,000 $ 155,000 34,000 189,000 928,000 357,000 259,000 $1,733,000 $ 3,118,000 1,091,000 1,227,000 935,000 292,000 89,380 $ 202,620 Additional Information on Current Year Transactions Purchased equipment for $57,000 cash. b. Issued 40,000 shares of common stock for $5 cash per share. c. Declared and paid $102,620 in cash dividends. Prior Year $ 414,600 155,000 582,000 1,151,600 383,000 (133,000) $ 1,401,600 $ 127,000 30,600 157,600 848,000 237,000 159,000 $ 1,401,600 Requirement General Journal Unadjusted General Ledger Trial Balance Direct Method Prepare the operating activities section of the statement of cash flows using the indirect method. Enter reductions to net cash provided by operating activities as negative values. Dates: December 31 to: December 31 Cash flows from operating activities: PANZARELLA COMPANY Statement of Cash Flows (Indirect Method) For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operating activities: Income statement items not affecting cash Changes in current operating assets and liabilities Indirect Method