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$ 1,160,000 (748,000) $ 412,000 Selling expenses Michaels Company had available at the end of 2020 the information as follows: Michaels Company Comparative Balance Sheets
$ 1,160,000 (748,000) $ 412,000 Selling expenses Michaels Company had available at the end of 2020 the information as follows: Michaels Company Comparative Balance Sheets As of December 31, 2020 and 2019 2020 2019 Current assets Cash $ 10,000 S 4,000 Accounts receivable, net 20,500 12,950 Short-term investments 22.000 30,000 Inventory 42,000 35,000 Prepaid rent 3,000 12,000 Prepaid insurance 3,100 1,650 Non-current assets Land 125,000 175,000 Building 350,000 350,000 Accumulated depreciation - Building (105,000) (87,500) Equipment 525,000 400,000 Accumulated depreciation - Equipment (130,000) (112,000) Patent 45,000 50,000 Total assets S 910,600 $ 871,100 Michaels Company Income Statement For the year ended December 31, 2020 Sales revenue (net) Cost of goods sold Gross margin Operating expenses Selling $ 79,200 Administrative expenses 156,700 Depreciation expenses 35,500 Amortization expenses 5,000 Total operating expenses Operating income Other revenues and expenses Gain on sale of land $ 8.000 Gain on sale of short-term investments 4,000 Dividend revenue 2,400 Interest expense (51,750) Income before taxes Income taxes expense Net income (276,400) $ 135,600 (37,350) $ 98,250 (39,400) S 58,850 $ 22.000 5,000 32,000 4,000 3,000 10,000 5,000 10,000 Current liabilities Accounts payable Income taxes payable Wages payable Short-term notes payable Non-current liabilities Long-term notes payable Bonds payable Shareholders' equity Share capital - Ordinary ($10 par) Share premium - Ordinary Retained earnings Total liabilities and equity 60,000 420,303 70,000 425,853 Additional information: 1. Michaels purchased a new equipment during the year 2020 by paying cash. There were no sales of building or equipment during the year. 2. Michaels retired $10,000 of its long-term notes payable without incurring any gains or losses. 3. Changes in retained earnings account resulted from net income earned and cash dividends declared. 4. Michaels issued additional 2,000 shares during the year when the price of a share was $13.75. 5. Interest expense shown in the income statement resulted from bonds payable. Payment of interest was classified as an operating activity, Michaels classified cash receipts from dividend revenue as an operating activitiy and cash payments for dividend as a financing activity 6. 240,000 25,000 123,297 910,600 220,000 17,500 88,747 871,100 $ Required: For ratio analysis, round your answers to the second decimal place. (a) Prepare a statement of cash flows for Michaels Company using the indirect method. (40 points) (6) Prepare a statement of cash flows for Michaels Company using the direct method. (32 points)
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