Extra-Ordinaire, Inc., sells a single product (Pulsa) exclusively through newspaper advertising.

The comparative income statements and balance sheets are for the past two years.

Additional Information
The following information regarding the company’s operations in 2011 is available from the company’s accounting records:
1. Early in the year the company declared and paid a $4,000 cash dividend.
2. During the year marketable securities costing $15,000 were sold for $11,000 cash, resulting in a $4,000 non-operating loss.
3. The company purchased plant assets for $20,000, paying $8,000 in cash and issuing a note payable for the $12,000 balance.
4. During the year the company repaid a $10,000 note payable, but incurred an additional
$12,000 in long-term debt as described in 3, above.
5. The owners invested $35,000 cash in the business as a condition of the new loans described in paragraphs 3 and 4, above.
Instructions
a. Prepare a worksheet for a statement of cash flows, following the example shown in Exhibit 13–7.
b. Prepare a formal statement of cash flows for 2011, including a supplementary schedule of noncash investing and financing activities. (Use the format illustrated in Exhibit 13–8 . Cash provided by operating activities is to be presented by the indirect method. )
c. Explain how Extra-Ordinaire, Inc., achieved positive cash flows from operating activities, despite incurring a net loss for the year.
d. Does the company’s financial position appear to be improving or deteriorating? Explain.
e. Does Extra-Ordinaire, Inc., appear to be a company whose operations are growing or contracting?
Explain.
f. Assume that management agrees with your conclusions in parts c, d, and e. What decisions should be made and what actions (if any) should be taken? Explain.

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EXTRA-ORDINAIRE, INC. COMPARATIVE INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2011 2010 2011 Sales . $640,000 $410,000 - 190,000 330,000 220,000 310,000 Gross profit on sales Less: Operating expenses (including depreciation of $28,000 in 2010 and $29,000 in 2011). Loss on sale of marketable securities . . . 260,000 250,000 4,000 70,000 S (34,000) . . 0 Net income (loss) EXTRA-ORDINAIRE, INC. COMPARATIVE BALANCE SHEETS December 31, 2010 2011 Assets Cash and cash equivalents Marketable securities Accounts receivable . .. Inventory .. - .. . - Plant and equipment (net of accumulated depreciation) 22,000 $60,000 27,000 12,000 35,000 120,000 128,000 250,000 241,000 .. $459,000 $476,000 . . 40,000 Totals... . Liabilities & Stockholders' Equity 50,000 70,000 16,000 14,000 235,000 237,000 . .108,000 143,000 50,000 12000 59,000 $476,000 s payable Accrued expenses payable Notes payable Capital stock (no par value) Totals $4 Exhibit 13-7 WORKSHEET FOR A STATEMENT OF CASH FLOWS AUTO SUPPLY CO. WORKSHEET FOR A STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011 Effects of Transactions Beginning Debit Balance Changes Ending Balance Balance sheet effects: ebChanges Credit Assets Cash and Cash Equivalents Marketable Securities Accounts Receivable... Inventory Plant and Equipment (net of 50,000 40,000 (x) 5,000 45,000 (8) 15,000 25,000 330,000 (5) 5,000 235,000 320,000 (4) 10,000 240,000 accumulated depreciation) 600,000 (9) 100,000 (3) 60,000 640,000 1,275,000 Totals. Liabilities & Stockholders' Equity Accounts Payable. Accrued Expenses Payable Mortgage Note Payable. Bonds Payable Capital Stock. Retained Earnings 1,250,000 (6) 10,000 160,000 45,000 (9) 70,000 70,000 350,000 160,000 380,000(2) 140,000 1250,000490,000 415.0001275.000 150,000 60,000 (7) 15,000 500,000 (10) 150,000 160,000 Totals 1.250,000 16.000000 Exhibit 13-8 AUTO SUPPLY CO. STATEMENT OF CASH FLOWS AUTO SUPPLY CO. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011 Cash flows from operating activities $ 250,000 60,000 5,000 10,000 S 325,000 Net income Add: Depreciation expense Decrease in inventory Increase in accounts payable Subtotal Less: Increase in accounts receivable Decrease in accrued expenses payable Gain on sales of marketable securities $10,000 15,000 20,000 45,000 $ 280,000 Net cash provided by operating activities Cash flows from investing activities Proceeds from sales of marketable securities $ 35,000 Cash paid to acquire plant assets (see supplementary schedule below) Net cash provided by investing activities Cash flows from financing activities (30,000) 5,000 Dividends paid. $(140,000) (150,000) Payments to retire bonds payable Net cash used for financing activities Net decrease in cash Cash and cash equivalents, Jan. 1, 2011 Cash and cash equivalents, Dec. 31, 2011 (290,000) S (5,000) 50,000 S 45,000 Supplementary Schedule: Noncash Investing and Financing Activities Purchases of plant assets Less: Portion financed through issuance of $ 100,000 long-term debt Cash paid to acquire plant assets 70,000 S 30,000