2021 CLASS NOTES: STATEMENT OF CASH FLOWS PROBLEM A -- Statement of Cash Flows (old exam question) Presented below are the comparative statements of position of PaulBeck Corporation as of December 31, 2019, and 2020, together with selected information from the income statement for the year ended December 31, 2020. PaulBeck Corporation Statement of Financial Position December 31 Assets 2020 2019 $10,000 $7,000 49,000 60,000 1 I 62,000 40,000 (1.000) 5,000 0 4,000 Current Assets: Cash Accounts Receivable Inventories Allowance to Reduce Inventory to Market Prepaid Rent Non-Current Assets: Net Deferred Tax Asset Investments Printing Equipment Accumulated Depreciation--Equip. Goodwill TOTAL ASSETS 0 0 35,000 20,000 130,000 154,000 (35,000) 46,000 316,000 (25,000) 50,000 295,000 Liabilities: $46,000 $40,000 1,800 1,600 4,000 5,000 Current Liabilities: Accounts Payable Net Deferred Tax Liability Income Taxes Payable Short-term Loans Payable (nonoperating - related) Non-Current Liabilities: OPEB Liability Long-term Mortgage Payable Stockholders' Equity 16,000 14,000 0 0 60.000 70,000 100.000 3100 100,000 Stockholders' Equity: Common Stock Paid in Capital in excess of par Retained Eamings TOTAL LIAB. & EQUITY 30,000 58,200 100,000 30,000 34,400 $295,000 $316,000 16 2021 CLASS NOTES: STATEMENT OF CASH FLOWS 1 PROBLEM A continued... PaulBeck Corporation Income Statement for 2020 Sales $338,150 Cost of Goods Sold 175,000 Gross Margin 163,150 Operating Expenses 116,000 Operating Income 47,150 Interest Expense 9,400 Loss due to Inventory Writedown 1,000 Income before taxes 36.750 Income tax expense 6,950 Net Income 29,800 ADDITIONAL INFORMATION: 1. Dividends in the amount of $6,000 were declared and paid during 2020. 2. Depreciation expense and impairment loss on goodwill are included in operating expenses. 3. Goodwill decreased during the year because of its impairment Entry was debit to operating Norwe 47,150 9,400 1,000 Operating Income Interest Expense Loss due to Inventory Writedown Income before taxes Income tax expense Net Income 36,750 6,950 29,800 1 ADDITIONAL INFORMATION: 1. Dividends in the amount of $6,000 were declared and paid during 2020. 2. Depreciation expense and impairment loss on goodwill are included in operating expenses. 3. Goodwill decreased during the year because of its impairment. Entry was debit to operating expenses and credit to goodwill . 4. All inventory purchases were "run through the accounts payable account. Also, the accounts payable account only has inventory purchases in it. 5. Accounts receivable is only for sales on account. 6. There were no credits to the prepaid rent account during the year. There were no credits to the printing equipment account during the year. 7. The inventory writedown entry was: Debit Loss due to inventory writedown: Credit Allowance to reduce inventory to market (this is an allowance account like allowance for bad debts). REQUIRED: Prepare a COMPLETE statement of cash flows using the DIRECT method-- show everything you'd normally see on a statement of cash flows