CCC12 Natalie has prepared the balance sheet and income statement of Cookie & Coffee Creations Inc. and would like you to prepare the cash flow statement. The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2020 for the years 2020 and 2019 and the income statement for the year ended October 31, 2020, are presented below.

Additional information:

1. Equipment (cost $4,500 and book value $3,000) was disposed of at the beginning of the year for $500 cash and replaced with new equipment purchased for $4,000 cash.

2. Additional equipment was bought for $14,000 on November 1, 2019. A $12,000 note payable was signed. The terms provide for equal semi-annual installment payments of $2,000 on May 1 and November 1 of each year, plus interest of 5% on the outstanding principal balance.

3. Other equipment was bought for $13,000 cash.

4. Dividends were declared on the preferred and common stock on October 15, 2020, to be paid on November 15, 2018.

5. Accounts payable relate only to merchandise creditors.

6. Prepaid expenses relate only to other operating expenses.

Instructions

(a) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the indirect method.

*(b) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the direct method.

COOKIE & COFFEE CREATIONS INC. Balance Sheet

October 31,

2020

Cash

Accounts receivable

Inventory 7,897 Prepaid expenses 5,800 Equipment 102,000 Accumulated depreciation

equipment (25,200) Total assets $116,071

Assets

2019

$5,550 2,710 7,450 6,050

75,500

(9,100) $88,160

Continuing Cookie Chronicle 1

$ 22,324 3,250

COOKIE & COFFEE CREATIONS INC. Balance Sheet

October 31,

Liabilities and Stockholders Equity

Accounts payable

Income taxes payable

Dividends payable

Salaries and wages payable

Interest payable

Note payable

Preferred stock, no par, $6 cumulative, 3,000 and 2,800 shares issued, respectively

Common stock, $1 par25,180 shares issued and outstanding

Additional paid-in capitaltreasury stock Retained earnings

Total liabilities and stockholders equity

2020

$ 1,150 9,251 27,000 7,250 188 10,000

15,000

25,180 250 20,802 $116,071

2019

$ 2,450 7,200 27,000 1,280 0 0

14,000

25,180 250 10,800 $88,160

COOKIE & COFFEE CREATIONS INC. Income Statement

Year Ended October 31, 2020

Sales

Cost of goods sold

Gross profit

Operating expenses

Salaries and wages expense

Depreciation expense

Other operating expenses Income from operations

Other expenses

Interest expense

Loss on disposal of plant

$147,979 17,600 48,186

$ 413

$485,625 222,694 262,931

213,765 49,166

2,913 46,253

9,251 $ 37,002

assets 2,500

Income before income tax Income tax expense

Net income