Neighborhood Supermarkets is preparing to go public, and you are asked to assist the firm by preparing its statement of cash flows for 20X1. Neighborhood’s balance sheets at December 31, 20X0, and December 31, 20X1, and its income statement for the year ending December 31, 20X1, appear below.

Neighborhood Supermarkets, Inc.
Income Statement for the Year Ended December 31, 20X1
($ in thousands)
Net sales	$ 2,516,364
Cost of sales	1,837,657
Gross profit	678,707
Depreciation expense	(47,201)
Amortization expense	(6,207)
Self-insurance expenses	(43,000)
Loss on sale of equipment	(60)
Operating, general, and administrative expenses	(486,665)
Income from operations	95,574
Gain on sale of marketable securities	208
Investment income	1,556
Income before provision for income taxes	97,338
Provision for income taxes	(24,335)
Net income	$ 73,003

Additional Information:

a. The only entries in retained earnings for 20X1 were for net income and cash dividends.

b. During 20X1, bad debt expenses of $906 were included in operating, general, and administrative expenses; no accounts were written off.

c. Adjusting marketable securities upward by $68 led to the increase of $44 in accumulated other comprehensive income, after considering the deferred tax effect of $24.

d. On July 1, 20X1, Neighborhood Supermarkets bought land ($190) and equipment ($20,000), paying $10,190 in cash and issuing a $10,000 five-year note payable with interest at 6% payable annually. Accrued interest on the note was included in operating, general, and administrative expenses because the amount was deemed too immaterial to report separately.

e. No treasury stock was reissued during 20X1.

f. Equipment costing $9,052 with a book value of $1,051 was sold for cash.

g. A much smaller competitor was acquired on December 31, 20X1, for $34,890 cash and a 7%, $15,000 note that matures in two years. Neighborhood allocated the acquisition cost as follows: inventory, $5,500; intangibles, $5,926; equipment, $16,195; leasehold improvements, $2,829; goodwill, $19,440.

Required:

Use the indirect method to prepare Neighborhood Supermarkets’ statement of cash flows for 20X1. Use the worksheet approach from the Chapter 4 appendix.

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Neighborhood Supermarkets, Inc. Balance Sheet December 31, ($ in thousands) 20X1 20X0 Assets Current: $ 91,000 18,147 52,478 $ 59,351 20,068 45,318 Cash Marketable securities Accounts receivable, net Inventories 228,515 6,254 396,394 187,433 Prepaid expenses 5,085 Total current assets 317,255 Property and equipment: Land 86, 193 86,003 417,954 673,570 Buildings and improvements Equipment Leaschold improvements Accumulated depreciation 417,954 646,427 136,589 139,418 (815,060) 502,075 35,162 (775,860) 511,113 15,722 4,124 $ 848,214 Total property and equipment Goodwill Intangibles and other 3,843 Total assets $ 937,474 Liabilities Current: Accounts payable Accrued expenses Accrued self-insurance $ 127,865 $ 95,128 28,173 23,344 30,227 21,998 Deferred revenue 6,731 484 187,305 6,920 738 Income taxes payable Total current liabilities 154,303 Noncurrent: Notes payable Postretirement benefit obligations Deferred income taxes 25,000 12,454 22,544 12,454 20,357 Total noncurrent liabilities 59,998 32,811 Total liabilities 247,303 187,114 Stockholders' Equity Common stock 9,949 9,949 Retained earnings Accumulated other comprehensive income Treasury stock (at cost) Total stockholders' equity Total liabilities and stockholders' equity 826,473 795,473 4,604 4,560 (148,882) (150,855) 690, 171 661,100 $ 937,474 $ 848,214