Comparative statement of financial position accounts of Marcus Inc. are presented below.

Additional data (ignoring taxes):
1. Net income for the year was $42,500.
2. Cash dividends declared and paid during the year were $21,125.
3. A 20% share dividend was declared during the year. $25,000 of retained earnings was capitalized.
4. Equity investments that cost $25,000 were sold during the year for $28,750.
5. Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.
Marcus’s 2010 income statement follows (ignoring taxes).

Instructions
(a) Compute net cash flow from operating activities using the direct method.
(b) Prepare a statement of cash flows using the indirectmethod.

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MARCUS INC COMPARATIVE STATEMENT OF FINANCIAL POSITION AcCOUNTS AS oF DECEMBER 31, 2010 AND 2009 December 31 Debit Accounts 2010 2009 Cash Accounts Receivable Merchandise Inventory Equity Investments (non-trading) Machinery Buildings Land $42,000 33,750 60,000 24,000 38,500 18,750 56,250 7,500 $238,750 70,500 30,000 22,250 30,000 67,500 7,500 $269,750 Credit Accounts Allowance for Doubtful Accounts Accumulated Depreciation-Machinery Accumulated Depreciation-Buildings Accounts Payable Accrued Payables Long-Term Note Payable Share Capital-Ordinary, no par Retained Earnings $ 2,250 5,625 13,500 35,000 3,375 21,000 150,000 39,000 $269,750 $ 1,500 2,250 9,000 24,750 2,625 31,000 125,000 42,625 $238,750 Sales Less: Cost of goods sold Gross margin Less: Operating expenses (includes $8,625 depreciation and $5,400 $540,000 380,000 160,000 bad debts) Income from operations Other: Gain on sale of equity investments (non-trading) 120,450 39,550 $3,750 (800)2,950 $42,500 Loss on sale of machinery Net income