A comparative balance sheet for Alcorn Company containing data for the last two years is as follows:

The following additional information is available about the company€™s activities during this year:
a. The company declared and paid a cash dividend this year.
b. Bonds with a principal balance of $380,000 were repaid during this year.
c. Equipment was sold during this year for $70,000. The equipment had cost $130,000 and had $40,000 in accumulated depreciation on the date of sale.
d. Long-term investments were sold during the year for $110,000. These investments had cost $50,000 when purchased several years ago.
e. The subsidiaries did not repay any outstanding loans during the year.
f. Alcorn did not repurchase any of its own stock during the year.
The company reported net income this year as follows:
:

Required:
1. Using the indirect method, prepare a statement of cash flows for this year.
2. What problems relating to the company€™s activities are revealed by the statement of cash flows that you haveprepared?

Alcorn Company Comparative Balance Sheet This Year Last Year Assets Current assets Inventory Prepaid expenses 590,000 608,000 10,000 610,000 420,000 5,000 Property, plant, and equipment 2,370,000 1,800,000 560,000 Net property, plant, and equipment. 1,755,000 1,240,000 130,000 70,000 615,000 Long-term investments.. 80,000 120,000 Liabilities and Stockholders' Equity Current liabilities 42,000 118,000 730,000 400,000 Accrued liabilities. . .._. . . Income taxes payable . . 25,000 133,000 Bonds payable.. 620,000 Stockholders' equity: Retained earnings . 496,000 395,000 Total liabilities and stockholders' equity. . $3,234,000 $2,525,000 $3,000,000 1.860,000 1,140,000 930,000 210,000 Selling and administrative expenses.... Nonoperating items: 40,000 250,000 80,000 S 170,000 Loss on sale of equipment... Income before taxes .. 20,000