Current Attempt in Progress You have completed the field work in connection with your audit of Sarasota Corporation for the year ended December 31, 2020. The balance sheet accounts at the beginning and end of the year are shown below. Dec. 31, 2020 Dec. 31, Increase or 2019 (Decrease) Cash $341,817 $366,540 ($24,723 ) Accounts receivable 577,392 434,190 143,202 Inventory 912,291 750,300 161,991 Prepaid expenses 14,760 9,840 4,920 Investment in subsidiary 135,915 0 135,915 Cash surrender value of life insurance 2,834 2,214 620 Machinery 254,610 233,700 20,910 Buildings 658,296 501,717 156,579 Land 64,575 64,575 0 Patents 84,870 78,720 6,150 Copyrights 49,200 61,500 (12,300 ) Bond discount and issue cost 5,537 0 5,537 $3,102,097 $2,503,296 $598,801 Income taxes payable $111,008 $97,908 $13,100 Accounts payable 368,114 344,400 23,714 Dividends payable 86,100 0 86,100 Bonds payable-8% 153,750 0 153,750 Bonds payable-12% 0 123,000 (123,000) Allowance for doubtful accounts 43,419 49,200 (5,781) Accumulated depreciation-buildings 521,520 492,000 29,520 Accumulated depreciation-machinery 212,790 159,900 52,890 Premium on bonds payable 0 2,952 (2,952) Common stock-no par 1,446,726 1,787,436 (340,710 ) Paid-in capital in excess of par-common stock 134,070 0 134,070 Retained earnings-unappropriated 24,600 (553,500 ) 578,100 $3,102,097 $2,503,296 $598,801 STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2020 January 1,2020 Balance (deficit) $(553,500) March 31, 2020 Net income for first quarter of 2020 30,750 April 1, 2020 Transfer from paid-in capital 522,750 Balance 0 December 31, 2020 Net income for last three quarters of 2020 110,700 Dividend declared-payable January 21, 2021 (86,100 ) Balance $24,600 Your working papers from the audit contain the following information: 1. 2. On April 1, 2020, the existing deficit was written off against paid-in capital created by reducing the stated value of the no-par stock. On November 1, 2020, 36,408 shares of no-par stock were sold for $316,110. The board of directors voted to regard $5 per share as stated capital. 3. A patent was purchased for $18,450. 4. 5. During the year, machinery that had a cost basis of $20,172 and on which there was accumulated depreciation of $6,396 was sold for $11,070. No other plant assets were sold during the year. The 12%, 20-year bonds were dated and issued on January 2, 2008. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2020. 6. 7. The 8%, 40-year bonds were dated January 1, 2020, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was $1,032. Sarasota Corporation acquired 70% control in Crimson Company on January 2, 2020, for $123,000. The income statement of Crimson Company for 2020 shows a net income of $18,450. 8. Major repairs to buildings of $8,856 were charged to Accumulated Depreciation-Buildings. 9. Interest paid in 2020 was $12,915 and income taxes paid were $41,820. From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest. (Round answers to O decimal places, e.g. 2,500. Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Cash Flows from Operating Activities SARASOTA CORPORATION Statement of Cash Flows For the Year Ended December 31, 2020 Net Income Adjustments to reconcile net income to Net Cash Provided by Operating Activities Increase in Accounts Receivable (Net) (Indirect Method) $ +A Increase in Accounts Payable Increase in Taxes Payable Increase in Inventory Increase in Cash Surrender Value of Life Insurance Increase in Prepaid Expenses Investment in Subsidiary < < < < Supplemental disclosures of cash flow information: Cash Paid During the Year for Interest Cash Paid During the Year for Income Taxes Noncash Investing and Financing Activities Reduction in Stated Value of Stock to Eliminate Deficit +A $ +A : +A +A