Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information.

Additional data related to 2020 are as follows.

1. Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.

2. $5,000 of the long-term note payable was paid by issuing common stock.

3. Cash dividends paid were $5,000.

4. On January 1, 2020, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).

5. Equity investments (ownership is less than 20% of total shares) were sold at $1,500 above their cost. No unrealized gains or losses were recorded in 2020.

6. Cash and a long-term note for $16,000 were given for the acquisition of equipment.

7. Interest of $2,000 and income taxes of $5,000 were paid in cash.

Instructions

a. Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel.

b. What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:

1. A severely financially troubled firm?

2. A recently formed firm that is experiencing rapid growth?

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December 31 2020 2019 $ 38,500 Cash $13,000 Accounts receivable 12,250 10,000 Inventory 12,000 10,000 Equity investments Buildings Equipment Copyrights -0- 3,000 -0- 29,750 40,000 20,000 5,000 5,250 Totals $107,750 $91,000 $ 3,000 $ 4,500 Allowance for doubtful accounts Accumulated depreciation-equipment Accumulated depreciation-buildings Accounts payable Dividends payable Notes payable, short-term (nontrade) Long-term notes payable 2,000 -0- 4,500 6,000 5,000 4,000 -0- 5,000 3,000 4,000 36,000 25,000 Common stock 38,000 33,000 Retained earnings 20,750 5,000 $107,750 $91,000