Chapter 23, Problem 12E

To determine

Operating activities: The items that are directly linked with the transactions that affect the net income of the company are termed as operating activities.

Direct method: It reports cash receipts and disbursements arising out of operating activities. Difference between these amounts helps us arrive at the net cash flows from operating activities.

To prepare: To prepare statement of cash flow (Direct method).

Given Information: Comparative Balance sheet as on December 31, 2017 & 2016.

Particulars	2017 ($)	2016 ($)
Cash	1,800	1,150
Receivables	1,750	1,300
Inventory	1,600	1,900
Plant Assets	1,900	1,700
Accumulated depreciation	(1,200)	(1,170)
Long-term investments (held-to-maturity)	1,300	1,420
Total Assets	7,150	6,300
Accounts payable	1,200	900
Accrued Liabilities	200	250
Bonds payable	1,400	1,550
Capital Stock	1,900	1700
Retained earnings	2,450	1900
Total Liabilities & Stockholders’ Equity	7,150	6,300

Income statement has been provided in the question.