(Prepare a cash flow statement, LO 5) The Pas Ltd. was organized on August 1, 2005 with a cash investment of $500,000 by its shareholders. The Pas arranged a mortgage with a local lender for $400,000 and purchased a warehouse for $600,000. During its fiscal year ended July 31, 2006 The Pas collected $325,000 in cash from customers, paid $200,000 in cash for operating expenses, and paid $20,000 in cash dividends to its shareholders.

Required:

a. Classify each of the cash flows described above as operating, investing, or financing.

b. Organize the cash flows into a cash flow statement.

c. Explain what your cash flow statement tells you that an income statement does not.