Condensed financial data follow for E-Perform Ltd. E-Perform reports under ASPE.

Additional information:

1. New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 note payable.

2. Equipment with an original cost of $57,500 was sold at a loss of $7,500.

3. Notes payable matured during the year and were repaid.

4. A long-term investment was acquired for cash.

Instructions

a. Prepare a cash flow statement for the year using the indirect method.

b. Prepare the operating section of the cash flow statement using the direct method assuming that accounts payable relate only to merchandise creditors and that accrued expenses payable and prepaid expenses relate to operating expenses.

Taking It Further

E-Perform Ltd.?s cash balance more than doubled in 2021. Briefly explain what caused this, using the cash flow statement.

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E-PERFORM LTD. Balance Sheet December 31 Assets 2021 2020 Cash $ 97,800 $ 48,400 Accounts receivable 75,800 43,000 Inventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciation 122,500 92,850 38,400 26,000 128,000 114,000 270,000 242,500 (50,000) (52,000) Total assets $682,500 $514,750 Liabilities and Shareholders' Equity $ 93,000 $ 77,300 Accounts payable Accrued expenses payable Notes payable 11,500 7,000 110,000 150,000 Common shares 234,000 175,000 Retained earnings 234,000 105,450 Total liabilities and shareholders' equity $682,500 $514,750 E-PERFORM LTD. Income Statement Year Ended December 31, 2021 Sales $492,780 Cost of goods sold 185,460 Gross profit Operating expenses Depreciation expense Loss on sale of equipment Profit from operations Other expenses 307,320 $62,410 46,500 7,500 116,410 190,910 Interest expense 4,730 Profit before income tax 186,180 Income tax expense 45,000 Profit $141,180