4.10 a. calculate the amount of dividends from firm A & B (Hint: net income - change in retained earnings = dividends) b. Prepare a statement of cash flows for each firm using the indirect method c. Analyse the difference in the two firms (a) Net income - Change in retained earnings = Dividends Firm A Firm B Income Statement for Year Ended December 31, 2015 (b) Firm A Firm B Activity? Cash flow from operating activities Firm A Firm B Sales $1,000,000 $1,000,000 COGS 700,000 700,000 Gross Profit 300,000 300,000 Other expenses Selling and admin 120,000 115,000 Depreciation 10,000 30,000 Interest Expense 20,000 5,000 Earnings before taxes 150,000 150,000 Cash provided (used) by operations Income tax Expense 75,000 75,000 Net Income $75,000 $75,000 Cash flow from investing activities Changes in Balance Sheet Accounts December 31, 2014 to 2015 Cash flow from financing activities Firm A Firm B Cash and cash equivalents $- $10,000 Accounts receivable 40,000 5,000 Inventory 40,000 -10,000 Net cash flow from financing activities Purchase of plant, property and equipment 20,000 70,000 Less acumualted depreciation -10,000 -30,000 Change in cash Total Assets $90,000 $45,000 Accounts payable -$20,000 -$5,000 (c) Firm A Firm B Notes Payable (current) 17,000 2,000 Inflows $ % $ Long-term debt 20,000 -10,000 Deferred taxes 3,000 18,000 Capital stock - - Retained earnings 70,000 40,000 Total Liabilities and Equity $90,000 $45,000 Outflows Change in cash