Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information. Additional data related to 2010 are as follows.
1. Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.
2. $5,000 of the long-term note payable was paid by issuing common stock.
3. Cash dividends paid were $5,000.
4. On January 1, 2010, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).
5. Investments (available-for-sale) were sold at $1,500 above their cost. The company has made similar sales and investments in the past.
6. Cash and long-term note for $16,000 were given for the acquisition of equipment.
7. Interest of $2,000 and income taxes of $5,000 were paid in cash.
(a) Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel. Flood damage is unusual and infrequent in that part of the country.
(b) What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:
(1) A severely financially troubled firm?
(2) A recently formed firm that is experiencing rapidgrowth?