Wong Corporation began operations on January 1, 2019. Its adjusted trial balance at December 31, 2019 and 2020, is shown below along with some other information.

Other information regarding Wong Corporation and its activities during 2020:

a. Assume all accounts have normal balances.

b. Equipment was purchased for $26,000 cash after selling old equipment for $8,000 cash.

c. Common shares were issued for cash.

d. Cash dividends were declared and paid.

e. Machinery was sold for cash of $10,000.

f. All revenues and other expenses were on credit.

Required

Using the information provided, prepare a statement of changes in equity and a statement of cash flows ( applying the indirect or direct method)* for the year ended December 31, 2020, plus a classified balance sheet at December 31, 2020.

*Note to Instructor: Solutions are available for both the indirect and direct methods.

Analysis Component: Refer to the statement of cash flows just prepared. Explain how it was possible for Wong Corporation to purchase $26 (thousand) of new equipment and pay $20 (thousand) dividends given that the company?s income was only $16 (thousand).

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Wong Corporation Adjusted Trlal Balance (000s) December 31 Account 2020 2019 $ 21 $ 32 Accounts payable. Accounts receivable. Accumulated depreciation, equipment. 96 100 21 52 Accumulated depreciation, machinery. 15 36 Allowance for doubtful accounts. 12 Cash. Cash dividends. 70 98 20 20 Common shares. 108 98 Depreciation expense, equipment. Depreciation expense, machinery. 4 4 Equipment. 88 110 Income tax expense. 10 19 Machinery. 34 64 Notes payable; long term'. Other expenses (including losses). 25 373 200 Preferred shares. 30 30 Retained earnings. Revenues (including gains). Unearned revenue. 75 79 410 316 4 8.