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For the just completed year, Hanna Company had net income of $142,000. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Beginning Year of Year Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Current liabilities: Accounts payable Accrued liabilities Income taxes payable $ 58,000 $ 166,000 $ 450,000 $ 12,200 $ 83,000 $ 190,000 $ 352,000 $ 13,900 $ 350,000 $ 8,700 $ 39,800 $ 388,000 $ 11,600 $ 32,000 The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year. The company's income statement for the year appears below: Sales Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income taxes $1,060,000 580,000 480,000 302,000 178,000 36,000 $ 142,000 Net income Required: Using the direct method, convert the company's income statement to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Hanna Company Direct Method of Determining the Net Cash Flows from Operating Activities Net income $ 1,060,000 Adjustments to a cash basis: Decrease in accounts receivable 190,000 (166,000) $ 1,084,000 Cost of goods sold 580,000 Adjustments to a cash basis: Increase in inventory 450,000 Decrease in accounts payable (352,000) (350,000) 328,000 Selling and administrative expenses 302,000 Adjustments to a cash basis: Depreciation (42,000) Decrease in prepaid expenses (8,700) Decrease in accrued liabilities (13,900) 12,200 249,600 Income taxes 36,000 Adjustments to a cash basis: Increase in income taxes payable 32.000 (39,800) 28,200 Net cash provided by operating activities $ 478,200 a. Paid suppliers for inventory purchases. b. Bought equipment for cash. c. Paid cash to repurchase its own stock. d. Collected cash from customers. e. Paid wages to employees. f. Equipment was sold for cash. g. Common stock was sold for cash to investors. h. Cash dividends were declared and paid. i. A long-term loan was made to a supplier. j. Income taxes were paid to the government. k. Interest was paid to a lender. 1. Bonds were retired by paying the principal amount due. Required: Indicate how each of the above transaction would be classified on a statement of cash flows. As appropriate, place an X in the Operating, Investing, or Financing column. Also, place an X in the Cash Inflow or Cash Outflow column. Transaction Investing Activity Operating Activity Financing Activity Cash Inflow Cash Outflow a. X b. X C. d. X e. X X f. Paid suppliers for inventory purchases Bought equipment for cash Paid cash to repurchase its own stock Collected cash from customers Paid wages to employees Equipment was sold for cash Common stock was sold for cash to investors Cash dividends were declared and paid A long-term loan was made to a supplier Income taxes were paid to the government Interest was paid to a lender Bonds were retired by paying the principal amount due g. h. X i. j. k X 1. X

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