Problem: Below is Smith Corporation Comparative Balance Sheet for 2018 and 2017, alongside with a 2018 Income Statement. Prepare a direct method cash flow statement, reconciliation schedule, and schedule of significant noncash transactions. Show in a step by step solution.

2018 2017

Assets: Current Assets: Cash $54,000 $50,000; Accounts Receivable 56,000 45,000; Allowance for Doubtful Accounts (4000) (3000; Interest Receivable 1,000 -0- ;Inventory 84,000 82,000;Trading Securities Inv. (net) 24,000 25,000; Prepaid Insurance 3,000 5,000; Supplies 3,000 2,000;Total Current Assets 221,000 206,000; Property, Plant and Equipment: Equipment 180,000 140,000; Acc. Depreciation (41,000) (55,000) ; Total PPE: 139,000 85,000; Long-term Investments : Available for sale securities(net) 30,000 14,000; Equity method security inv. 25,000 20,000; Intangible Assets; Patent 25,000 30,000;Total Assets 440,000 355,000; Liabilities: Current Liabilities: Accounts Payable 68,000 73,000;Dividends Payable 19,000 7,000;Taxes Payable 16,000 15,000;Interest Payable 4,000 5,000; Wages Payable 1,000 3,000;Unearned Revenue 6,000 5,000; Total Current Liabilities 114,000 108,000; Long-term Liabilities; Bonds Payable;150,000 100,000; Premium on Bonds Payable 7,000 8,000; Notes Payable 10,000 -0-;Total long-term Liabilities: 167,000 108,000; Contributed Capital:Common Stock ($1 par) 18,000 8,000; Paid-In-Capital in Excess of Par :66,000 40,000: Acc. OCI (3000) -0-;Retained Earnings 78,000 96, 000;Treasury Stock -0- (5,000);Total Stockholders Equity 159,000 139,000;Total Liabilities and Stockholders Equity 440,000 355,000;Sales $506,000;Cost of Goods Sold 256,000;Gross Profit 250,000;Operating Expenses:Wages Expense 139,000;Bad Debt Expense 6,000;Depreciation Expense 15,000;Insurance Expense 4,000;Patent Amortization 5,000;Supplies Expense 3,000;General adm. Expenses 13,000;Total Operating Expenses 185,000;Operating Income 65,000;Other Income and Expenses:Loss on sale of Equipment $3000;Interest Expense10,000; Unr. Hold. Loss - Trading 1,000 ; Revenue-equity method inv. 10,000;Interest Revenue 2,000;Total Other Income and Expenses: 2,000;Income Before Taxes 63,000;Income Tax Expense 16,000;Net Income: 47,000

Other Information:

The company sold equipment costing $50,000 during the year. During the year, the company issued $10,000 of new notes payable as partial payment for equipment. Unearned revenue represents down payments by customers on special orders. A 30% stock dividend was declared and issued during the year. 3000 shares were issued at a time when the market price was $10/share (par value is $1/share). The available for sale investment represents bonds issued by another company. The AOCI represents a decline in their value. Treasury stock was sold for $3,000. No additional equity method investments were purchased.