Mars Electronics is a distributor for the Global Electric Company (GEC), a large manufacturer of electrical and electronics products for consumer and institutional markets. Below are the semiannual financial statements of the company for the last year and a half.

a. Prepare Mars Electronics’ cash-flow statements according to the direct method for the six months ending June 30, 2009, December 31, 2009, and June 30, 2010.
b. What accounts for the changes in the firm’s cash flows over the three periods?

Income Statements in thousands) Six Months to June 30, 2009 Six Months to December 31, 2009 $13,851 11,671 Six Months to June 30, 2010 $11,720 9,834 1,677 76 70 26 $ 37 Net sales $10,655 Cost of goods sold Selling, general, and administrative expenses Depreciation expense Interest expense Income tax expense 8,940 1,554 1,92s 5S 90 62 23 S 32 Earnings after tax Dividends $44 Balance Sheets (in thousands) June 30, 2009 December 31, 2009 June 30, 2010 $ 60 2,616 2,694 Cash Accounts receivable Inventories Prepaid expenses Net fixed assets Total assets Short-term debt Accounts payable Accrued expenses Long-term debt Owners equity Total liabilities and owners' equity $ 160 1,953 1,986 80 733 S4,912 S 50 1,450 98 800 2,514 S4,912 $ 70 2,100 2,085 25 830 S5,110 S 50 1,650 138 700 2,572 S5,110 818 S6,230 S 880 1,950 114 750 2,536 S6,230