2016 Question 3 The financial statements of Sun Company for 2017 are set out below. Sun Company Balance Sheets at December 31 2017 Assets: Cash $85,600 Accounts receivable, net 72,850 Merchandise inventory 157.750 Prepaid expenses 6,080 Equipment 280,600 Accumulated depreciation-Equipment (80,600) Total assets $522.280 Liabilities: Accounts payable $52,850 Income taxes payable 15,240 Notes payable (long term) _59.200 Total liabilities $127,290 Equity: Common stock 253,000 Retained earnings 141.990 Total equity $394.990 Total liabilities and equity $522.280 $65,200 56,750 144,850 12,680 245,600 (97.600) $427.480 $45.450 12,240 79,200 $136,890 190,000 100.590 $290,590 $427.480 Sun Company Income Statement for Year Ended December 31, 2017 Sales $488,000 $212,540 43,000 106,260 6,400 (368,200) Cost of goods sold Depreciation expense Other operating expenses Interest expense Other gains (losses): Gain on sale of equipment Income before taxes Income taxes expense Net income 4.700 124.500 41.100 $83.400 Additional Information 1. A $20,000 note payable is retired at its carrying value in exchange for cash 2. 3. 4. The only changes affecting retained earnings are net income and cash dividends paid. New equipment is acquired for $120,000 cash. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. Prepaid expenses relate to Other Expenses on the income statement. All purchases and sales of merchandise inventory are on credit. 5. 6. Required: (a) Prepare a statement of cash flows for the year ended December 31, 2017 using the indirect method in compliance with either US GAAP or IFRS. (15 marks) (b) Comment on the following statement: "Cash balance is the most reliable figure in financial statements which cannot be easily manipulated