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

The following additional information is available about the company€™s activities during 2008, the current year:
a. Cash dividends declared and paid to common stockholders totaled $75,000.
b. Long-term notes with a value of $380,000 were repaid during the year.
c. Equipment was sold during the 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.
The company reported net income during 2008 as follows:

Required:
1. Prepare a worksheet like Exhibit 15€“9 for Alcorn Products.
2. Using the indirect method, prepare a statement of cash flows for 2008.
3. What problems relating to the company€™s activities are revealed by the statement of cash flows that you haveprepared?

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Alcorn Products Comparative Balance Sheet December 31, 2008, and 2007 Assets Prepaid expenses Loans to subsidiaries . . Less accumulated depreciation Patents -- Liabilities and Stockholders' Equity Total current liabilities Total stockholders' equity Total liabilities and stockholders' equity Sales Cost of goods sold Gross margin $3,000,000 1,860,000 1,140,000 930,000 210,000 Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments $60,000 20,000 Loss on sale of equipment Income before taxes Income taxes Net income 40,000 250,000 80,000 $ 170,000