Please answer parts a and b

CE 125% ES 9 Insert A Text Shape Media View Zoom Add Page Table Chart Comment Collaborate Format Document Text Body* Style Layout More Font Times New Roman Francis Supply Company is developing its annual financial statements on December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below: Current Year Prior Year Balance sheet at December 31 Cash $ 34,000 $ 29,000 Accounts receivable 35,000 28,000 Merchandise inventory 41,000 38,000 Property and equipment 121,000 100,000 Less: Accumulated depreciation (30,000) (25,000) $ 201,000 $ 170,000 Accounts payable $ 36,000 $ 27,000 Wages payable 1,200 1,400 Note payable, long-term 38,000 44,000 Common stock and additional paid-in capital 88,600 72,600 Retained earnings 37,200 25,000 $ 201,000 $ 170,000 Income statement for current year Sales $ 120,000 Gain on sale of equipment 1,000 Cost of goods sold 70,000 Other expenses 38,800 Net income $ 12,200 Bold 11 pt B I U U S 0 Character Styles None Text Color > Spacing 1.0 - Single > Bullets & Lists None e. Additional data: a. Bought equipment for cash, $31,000. Sold equipment with original cost of $10,000, accumulated depreciation of $7,000, for $4,000 cash. b. Paid $6,000 on the long-term note payable. C. Issued new shares of stock for $16,000 cash. d. No dividends were declared or paid. Other expenses included depreciation, $12,000; wages, $13,000; taxes, $6,000; and other, $7,800. f. Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash. Required: (A) Explain the reason why depreciation is needed to adjust to reconcile net income to cash flow from operations. (B) Explain the reason why you need to adjust gains/losses on disposition of Equipment for the reconciliation between net income and cash flows from operations. AE Drop Cap