Financial statement data for Bankhead, Inc., are provided. (All numbers are shown rounded to the nearest thousand, with 000's omitted.)

Required:
1. Compute the net cash flows from operations using the direct method.
2. Interpretive Question: Comment on the difference between net income and net cash flows from operations.
3. Prepare a statement of cash flows for Bankhead for the year ended December 31,2012.

Bankhead, Inc. Income and Retained Earnings Statements For the Year Ended December 31, 2012 Sales revenue Cost of goods sold. Gross margin. Operating expenses: Sales and administrative expenses. Depreciation expense Other expenses Total operating expenses. Income before taxes. $1.450 1,030 $ 420 S 110 17 81 $ 208 $ 212 Income taxes. 53 Net income Dividends paid Increase in retained earnings. $ 159 25 134 Bankhead, Inc. Comparative Balance Sheets December 31, 2012 and 2011 2012 2011 Assets S 783 Cash and cash equivalents Accounts receivable (net $ 612 448 456 Inventory Land. Store fixtures Accumulated depreciation, store fixtures Total assets. 245 980 1,450 255 (72) $3,117 1,300 255 (55) $3,540 Liabilities and Stockholders' Equity Liabilites: $ 170 574 Accounts payable Shortterm notes payable Long-term debt. . Total liabilities Stockholders' equity: Common stock. Paidin capital in excess of par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 366 735 1,024 $2,125 824 $1,568 $ 145 S 145 550 550 854 720 S1,549 $3,117 $1.415 S3,540