Prepare CFO under the DIRECT method using the data set of problem (a) P4-48 (12 marks) and (b) P4-52 (14 marks). Classify interest income as CFO.

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P4-48 STATEMENT OF CASH FLOWS (INDIRECT METHOD) ARCTIC COMPANY Statement of Cash Flows For Year Ended December 31, 2013 Net Cash Flow from Operating Activities Net Loss S (42,000) Add (Deduct) Items to Convert Net Loss to Cash Basis Depreciation 22,000 Gain on Sale of Land (25,000) Accounts Receivable Decrease 8,000 Inventory Decrease 6.000 Prepaid Advertising Decrease 3,000 Accounts Payable Decrease (14,000) Interest Payable Increase. 6.000 Net Cash Used by Operating Activities $ (36,000) Cash Flows from Investing Activities Sale of Land 70,000 Purchase of Equipment (183.000)* Net Cash Used by Investing Activities (113,000) Cash Flows from Financing Activities Issuance of Bonds Payable 200,000 Purchase of Treasury Shares. (30.000) Net Cash Provided by Financing Activities 170.000 Net Increase in Cash. 21,000 Cash at Beginning of Year 28.000 Cash at End of Year $ 49.000 *The sum of the increase in PPE assets account ($138,000) and the book value of the land sold ($45,000).P4-52 INDIRECT METHOD RAINBOW COMPANY Statement of Cash Flows For Year Ended December 31, 2013 Net cash flow from operating activities Net income $ 90,000 Add (deduct) items to convert net income to cash basis Depreciation 39,000 Patent amortisation 7,000 Loss on sale of equipment 5,000 Gain on sale of investments (3,000) Accounts receivable increase (10,000) Inventory increase (26,000) Prepaid expenses increase (4,000) Accounts payable increase 4,000 Interest payable increase. 1,000 Income tax payable decrease (2.000) Net cash provided by operating activities $101,000 Cash flows from investing activities Sale of investments, 60,000 Purchase of land (90,000) Improvements to building (95,000) Sale of equipment 14,000 Net cash used by investing activities (111,000) Cash flows from financing activities Issuance of bonds payable 30,000 Issuance of ordinary shares 24,000 Payment of dividends (50.000) Net cash provided by financing activities 4.000 Net decrease in cash and cash equivalents (6,000) Cash and cash equivalents at beginning of year. 25.000 Cash and cash equivalents at end of year $ 19,000