A colleague who is aware of your understanding of financial statements asks for help in analyzing the transactions and events of Zett Corporation. The following data are provided:

Additional data for the period January 1, Year 2, through December 31, Year 2, are:
1. Sales on account, $70,000.
2. Purchases on account, $40,000.
3. Depreciation, $5,000.
4. Expenses paid in cash, $18,000 (including $4,000 of interest and $6,000 in taxes).
5. Decrease in inventory, $2,000.
6. Sales of fixed assets for $6,000 cash; cost $21,000 and two-thirds depreciated (loss or gain is included in income).
7. Purchase of fixed assets for cash, $4,000.
8. Fixed assets are exchanged for bonds payable of $30,000.
9. Sale of investments for $9,000 cash.
10. Purchase of treasury stock for cash, $11,500.
11. Retire bonds payable by issuing common stock, $10,000.
12. Collections on accounts receivable, $65,000.
13. Sold unissued common stock for cash, $1,000.

Required:
a. Prepare a statement of cash flows (indirect method) for the year ended December 31, Year 2.
b. Prepare a side-by-side comparative statement contrasting two bases of reporting: (1) net income and (2) cash flows from operations.
c. Which of the two financial reports in (b) better reflects profitability?Explain.

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ZETT CORPORATION Balance Sheets December 31, Year 1 and Year 2 Year 1 Year 2 34,000 34,500 17,000 14,000 Cash Accounts receivable, net Inventory Investments (long term).· Fixed assets Accumulated depreciation Total assets 12,000 16,000 6,000 80,000 (48,000) 93,000 (39,000) Accounts payable Bonds payable Common stock Retained earnings Treasury stock Total liabilities and equity $100,000 $119,500 19,000 12,000 30,000 61,000 28,000 (11,500) $100,000 $119,500 10,000 50,000 21,000