A major shareholder of Systems Unlimited Inc., Phil Wang, is perplexed. The 2023 income statement showed a healthy profit of $280 thousand. Yet, when Linda Lewis, the bank manager and a friend of Phil’s, called to let him know that the bank had just reviewed the March 31, 2023, statements, she had said, “Phil, I just wanted to give you a heads-up. We’re extremely concerned about the message your 2023 statement of cash flows is sending. We may have to call in the secured loan unless the new company manager, Martha Shewart, has some reasonable explanations. I’m phoning her next.”When asked, Martha Shewart says, “That’s correct, Linda. We sold some of the unsecured manufacturing equipment. It cost $245 thousand and we got $150 thousand. No, it didn’t go for book value; we incurred a loss of $50 thousand ... where on the income statement? It’s in Other expenses. Don’t worry, Linda, a friend of mine, Ronald Trump, is going to sell us cheaper equipment. It’s on order. I signed the contract and it will be delivered in April.” After the conversation, Martha Shewart slams the phone down and thinks, “I own 20% of the shares in this company; how dare anybody question my actions?!”

Required1. Prepare a statement of cash flows (applying the direct method)* for the year ended March 31, 2023.2. Using the elements of critical thinking described on the inside front cover, identify and discuss the problem, goal, facts, and conclusion, while keeping in mind that it is best not to jump to conclusions.

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Systems Unlimited Inc. Comparative Balance Sheet Information March 31 (thousands) 2023 2022 $30 $75 490 50 244 80 100 305 40 22 14 2 0 390 96 Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) Accounts payable Income tax payable Bank loan payable (secured) 120 Common shares 390 Retained earnings 300 Systems Unlimited Inc. Income Statement For Year Ended March 31, 2023 (thousands) Sales Cost of goods sold Gross profit Operating expenses: Depreciation expense Other expenses Total operating expenses Profit from operations Income tax expense Profit $5 115 $1,400 950 $ 450 120 $ 330 50 $ 280