Comparative balance sheet accounts of Marcus Inc. are presented below.

Additional data (ignoring taxes):

1. Net income for the year was $42,500.

2. Cash dividends declared and paid during the year were $21,125.

3. A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized.

4. Equity investments (level of ownership is less than 20%) that cost $25,000 were sold during the year for $28,750. No unrealized gains and losses were recorded on these investments in 2020.

5. Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200. Marcus?s 2020 income statement follows (ignoring taxes).

Instructions

a. Compute net cash flow from operating activities using the direct method.

b. Prepare a statement of cash flows using the indirect method.

Marcus Inc. Comparative Balance Sheet Accounts As of December 31, 2020 and 2019 December 31 Debit Accounts 2020 2019 $ 42,000 70,500 $ 33,750 Cash Accounts Receivable 60,000 Inventory 30,000 24,000 Equity investments Machinery Buildings 22,250 30,000 38,500 18,750 67,500 56,250 Land 7,500 7,500 $269,750 $238,750 Credit Accounts $ 2,250 $ 1,500 Allowance for Doubtful Accounts Accumulated Depreciation-Machinery Accumulated Depreciation-Buildings Accounts Payable Accrued Payables Long-Term Notes Payable Common Stock, no-par Retained Earnings 5,625 13,500 2,250 9,000 35,000 24,750 3,375 2,625 31,000 125,000 21,000 150,000 39,000 42,625 $269,750 $238,750 Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses (includes $8,625 depreciation and $5,400 bad debts) Income from operations Other: Gain on sale of investments Loss on sale of machinery Net income $540,000 160,000 120,450 39,550 $3,750 (800) 2,950 $ 42,500