The 2020 income statement and some additional data for Flashpoint Consulting Ltd. follow:

Additional data:

a. Collections from clients were $114,000 more than revenues.

b. Increase in cash balance, $20,000.

c. Payments to employees are $8,000 less than salaries expense.

d. Interest expense and income tax expense equal their cash amounts.

e. Acquisition of computer equipment is $232,000. Of this amount, $202,000 was paid in cash and $30,000 by signing a long-term note payable.

f. Cash received from sale of land, $20,000.

g. Cash received from issuance of common shares, $84,000.

h. Payment of long-term note payable, $40,000.

i. Payment of cash dividends, $130,000.

j. Payments for rent and insurance were equal to expense.

k. Payment for office supplies was $12,000 more than expense.

l. Beginning cash balance; $36,000, ending cash balance; $56,000.

Required

1. Prepare Flashpoint Consulting Ltd.’s cash flow statement by the direct method and the note to the financial statements giving the summary of non-cash investing and financing activities.

2. Evaluate Flashpoint’s cash flow for the year. Mention all three categories of cash flows and the reason for your evaluation.

Transcribed Image Text:

FLASHPOINT CONSULTING LTD. Income Statement For the Year Ended September 30, 2020 Revenues Consulting revenue $548,000 Expenses Salaries expense $296,000 Amortization expense 58,000 Rent expense 14,000 Office supplies expense 16,000 Insurance expense 4,000 Interest expense 4,000 Income tax expense 36,000 428,000 Net income $120,000