Vaughan Sales Corp. prepared the financial statements for the year ended December 31 shown below:

Additional information:

a. The administrative expenses included the following:

Amortization expense on equipment = $24,000

Writedown of goodwill = $4,500

b. Sold equipment for its net book value. The equipment cost $44,685 and had been amortized for $15,000.

c. Purchased additional equipment for $94,750.

d. Exchanged common shares for land valued at $90,000.

e. Declared and paid cash dividends on common shares, $5,100.

f. Repurchased common shares for $75,000.

g. Paid $23,700 (of which $8,700 was interest) on the loans.

Required

1. Prepare a cash flow statement for Vaughan Sales Corp. for the year ended December 31, 2020, using the indirect method. Consider the investments in money market funds to be a cash equivalent.

2. Comment on the results indicated by the cash flow statement you created.

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VAUGHAN SALES CORP. Income Statement For the Year Ended December 31, 2020 Net sales $267,000 Cost of goods sold 120,000 Gross margin 147,000 Operating expenses Selling expenses $ 73,800 Administrative expenses 43,500 Interest expense 8,700 Total operating expenses 126,000 Operating income 21,000 Income taxes 8,400 Net income $ 12,600