2018 Case-1 CASE STUDY ANAYSIS ACCT 412: FINANCIAL STATEMENT ANALYSIS The financial statements of ABC Company appear below ABC COMPANY Comparative Balance Sheet December 31 2019 Assets Cash $ 46,000 Accounts receivable 15,000 Merchandise inventory 32,000 Property, plant, and equipment 50.000 Accumulated depreciation 121.000) Total $122.000 Liabilities and Stockholders' Equity Accounts payable $ 18,000 Income taxes payable 9.000 Bonds payable 8.000 Common stock 28.000 Retained earnings 59.000 Total $122.000 $ 23,000 34.000 15.000 78.000 124000) $126.000 $23.000 8.000 33.000 24.000 38.000 $126.000 ABC COMPANY Income Statement For the Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $430,000 270.000 160,000 45.000 115.000 5.000 110.000 24.000 $ 86,000 The following additional data were provided: 1. Dividends declared and paid were $35.000. 2 During the year, equipment was sold for $17.000 cash. This equipment cost $28.000 originally and had a book value of $17,000 at the time of sale 3. All depreciation expense is in the operating expenses 4. All sales and purchases are on account 5. Accounts payable pertain to merchandise suppliers 6. All operating expenses except for depreciation were paid in cash. Required 1) Prepare a statement of cash flows for ABC Company using the direct method. 2) Discuss, from an analyst's viewpoint, the results and effects of various events in cash flow statement by Operational cash flow Investment cash flow Financial cash flow 3. Compute and interpret liquidity ratios