The following balances are available for Madison Company: Bonds were issued during 2014 at face value, and

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The following balances are available for Madison Company:December 31 2013 2014 $ 12,000 $ 10,000 Cash Accounts receivable 10,000 12,000 Inventory Prepaid rent 8,000 7,000 1,200

Bonds were issued during 2014 at face value, and plant and equipment were acquired for cash. Depreciation expense for the year was $50,000. A net loss of $21,800 was reported.


Required
1. Prepare a statement of cash flows for 2014 using the indirect method in the Operating Activities section.
2. Briefly explain how Madison was able to increase its cash balance during a year in which it incurred a net loss.

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