Operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

 

$   40,000

Adjustments to convert net income to cash basis:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

$ 22,000

 

 

Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . .

(50,000)

 

 

Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(35,000)

 

 

Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,000

 

 

Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60,000

 

 

Decrease in accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12,000)

 

 

Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . .

5,000

 

(4,000)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .

 

 

36,000

Investing activities:

Proceeds from the sale of equipment . . . . . . . . . . . . . . . . . . . . . . . .

 

24,000

 

 

Loan to Allen Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(30,000)

 

 

Additions to plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .

(120,000)

 

 

Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . .

 

 

(126,000)

Financing activities:

Increase in bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

80,000

 

 

Increase in common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50,000

 

 

Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20,000)

 

 

Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . .

 

 

110,000

Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

(20,000)

Cash balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

27,000

Cash balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

 

$   47,000