Presented below are the comparative balance sheets and income statement for Wayfarer Inc., a private company reporting under ASPE.

Additional information:
1. Cash dividends of $10,800 were declared on December 30, 2017, payable on January 15, 2018.
2. A long-term investment was acquired for cash at a cost of $176,400.
3. Depreciation expense is included in the operating expenses.
4. The company issued 22,500 common shares for cash on March 2, 2017. The fair value of the shares was $10 per share. The shares were used to purchase additional equipment.
5. Equipment that originally cost $45,000 was sold during the year for cash. The equipment had a net book value of $16,200 at the time of sale.
6. The company issued a note payable for $90,000 and repaid $9,000 of it by year end.
7. Accounts Payable is used for merchandise purchases.
8. Accounts receivable relate to merchandise sales.
Instructions
(a) Prepare a cash flow statement for the year using the indirect method.
(b) Prepare the operating section of the cash flow statement using the direct method.
TAKING IT FURTHER
Wayfarer Inc.'s cash balance decreased by $55,800 in 2017. Briefly explain what caused this, using the cash flow statement. Should management be concerned about this decrease? Explain.

WAYFARER INC. Balance Sheet December 31 Assets Cash Accounts receivable Inventory Long-term investment Property, plant, and equipment Accumulated depreciation 2017 2016 120,600 181,800 369,000 176,400 1,008,000 (292,500) $1,563,300 $176,400 135,000 257,400 828,000 (252,000) $1,144,800 Liabilities and Shareholders' Equit Accounts payable Dividends payable Income tax payable Long-term notes payable Common shares Retained earnings 157,500 10,800 25,200 81,000 1,170,000 118,800 $1,563,300 117,000 28,800 945,000 54,000 $1,144,800 WAYFARER INC Income Statement Year Ended December 31, 2017 Sales Cost of goods sold Gross proft Operating expenses Loss on sale of equipment Profit from operations Interest expense Interest revenue Profit before income tax Income tax expense Profit $1,137,600 772,200 365,400 $265,500 3,600 269,100 96,300 5,400 (9,900) (4,500) 100,800 25,200 $ 75,600