2 The comparative Statement of Financial Position of Sophia Bhd. at 31 December 2018 is as follows. 2018 2017 RM RM ASSETS Land 100,000 150,000 Building 250,000 250,000 Accumulated depreciation - building (70,000) (50,000) Equipment 205,000 175,000 Accumulated depreciation - equipment (70,000) (42,000) Inventory 192,000 140,000 Prepaid expenses 12,140 16,540 Account receivable 77,000 64,000 Cash 41,000 57.000 737,140 760,540 EQUITY AND LIABILITIES Ordinary share capital, no par value 280,000 250,000 Retained earnings 174,140 200,540 Bonds payable 235,000 265,000 Accounts payable 48.000 737,140 45,000 760,540 The Statement of Profit or Loss and additional data of Sophia Bhd. for the year ended 31 December 2018 is as follows: Statement of Profit or Loss for the Year Ended 31 December 2017 Sales revenue RM332,800 Cost of goods sold (218,010) Gross profit 114,790 Operating expense (depreciation expense; RM 65,000 and (69.400) other expenses RM 4,400) Profit before tax 45,390 Income tax expense Profit for the year (12,500) 32,890 Additional information on events during 2018 is as follows: 1. The company sold a piece of land at cost. 2. New equipment was purchased for RM 70,000 cash. An old equipment costing RM 40,000 (accumulated depreciation RM 17,000) was sold for RM 25,000 cash. 3. Cash dividends of RM 59,290 were paid. 4. Bonds payable were redeemed at par value. 5. Ordinary shares were issued for cash. Required: (a) Prepare the statement of cash flows for the year ended 31 December 2018, using the indirect method. (b) How did Sophia Berhad finance its cash dividends of RM 59,290 in 2018 when it earned only RM32,890 profit in 2018