1. Presented below are the comparative December 31 financial statements for Nair Industries, Inc. Prepare a statement of cash flows for December 31, Year 2 using the indirect method. Nair Industries, Inc Balance Sheets At December 31, Year 2 and Year 1 Year 2 Year 1

Cash $96,719 $28,694

Accounts Receivable 100,000 85,313

Inventory 206,250 181,250

Prepaid Insurance 1,875 2,500

Land, Buildings, and Equipment 1,562,500 1,406,250

Accumulated Depreciation (762,500) (715,000)

Investments 19,375 106,250

Total Assets $1,224,219 $1,095,256

Accounts Payable $95,425 $185,838

Salaries Payable 25,000 30,625

Notes Payable 31,250 93,750

Bonds Payable 250,000

- Common Stock 375,000 375,000

Retained Earnings 447,544 410,044

Total $1,224,219 $1,095,256

Additional information for Year 2

(1) Sold available for sale securities costing $86,875 for $92,500.

(2) Equipment costing $25,000 with a book value of $6,250 was sold for $7,500.

(3) Issued 8% bonds at face value for $250,000.

(4) Purchased new equipment for $181,250 and paid cash.

(5) Paid cash dividends of $25,000.

(6) Net income was $62,500.