To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $250,000 and sold them for $360,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3 percent of sales. During the year she paid $3,920 cash to replace a defective tuner. Required:
Prepare an income statement and statement of cash flows for Daun’s first year of operation. (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.)