As the accountant for Awesome Foods Incorporated, you are responsible for preparing the cash flow statement. You have decided to prepare the statement using the indirect method and have gathered the following data from the accounting records:

Principal payments on non-current debt $ 50,000

Collections on accounts receivable 287,500

Increase in accounts payable 25,300

Acquisition of equipment by issuing non-current note payable 70,000

Depreciation expense 71,500

Collection of loan principal 58,000

Proceeds from sale of investments, not including $5,100 gain 49,100

Increase in accounts receivable 7,200

Cash payments to purchase capital assets 62,000

Decrease in accrued liabilities 30,600

Payment of cash dividends 43,500

Income tax expense and payment 39,300

Proceeds from sale of capital assets, not including $7,400 loss 22,600

Net income 143,100

Cash sales 217,400

Proceeds from issuance of common shares 300,000

Increase 41,700

Loan to another company 50,000

Bonds payable converted into common shares 130,000

Payments to suppliers 283,100

Decrease in prepaid expenses 12,800

Cash balance: December 31, 2016 62,500

Cash balance: December 31, 2017 462,200

Prepare the cash flow statement for the year ended December 31, 2017, using the indirect method.

Awesome Foods Inc. Statement of Cash Flows For Year Ended December 31, 2017
Cash Flow from Operating Activities:
Cash Flow from Investing Activities:
Cash Flow from Financing Activities:
Net Increase/(Decrease) in Cash:
Cash Balance: January 1, 2016
Cash Balance: December 31, 2017

Your best friend just lost his job because the company he was working for went bankrupt. He was complaining to you that even though the company had been profitable for three years in a row, it still went out of business. He asks you how this can happen.

Explain the most likely reason for the company declaring bankruptcy. Could your best friend have seen it coming? How?