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Instant Brake Inc.'s comparative balance sheet information at December 31, 2020 and 2019, and its income statement for the year ended December 31, 2020, are
Instant Brake Inc.'s comparative balance sheet information at December 31, 2020 and 2019, and its income statement for the year ended December 31, 2020, are as follows: Instant Brake Inc. Income Statement December 31, 2020 Sales $889,000 Cost of goods sold 566,000 Gross profit $323,000 Operating expenses $132,620 Depreciation expense 41,180 173,800 Operating Profit 149,200 Loss on sale of equipment 14,940 Investment income 21,520 Profit before taxes 155,780 Income taxes 22,000 Profit $133,780 Cash Cash equivalents Instant Brake Inc. Balance Sheet Information December 31 2019 $ 22,960 2020 $ 38,000 Net Change $15,040 Accounts receivable. 27,280 86,320 7,600 19,680 27,440 58,880 Inventory 112,240 73,520 38,720 Investment 0 27,280 (27,280) Land 74,800 74,800 0 Building and equipment 403,580 425,100 (21,520) Accumulated depreciation 108,080 86,960 21,120 Accounts payable 5,820 35,800 (29,980) Dividends payable 2,400 1,600 800 Bonds payable 14,000 0 Preferred shares 79,600 79,600 14,000 e Common shares Retained earnings 404,080 404,080 128,240 50,660 77,580 During 2020, the following transactions occurred: 1. Purchased equipment for $21,200 cash. 2. Sold the investment on January 1, 2020, for $48,800, resulting in investment income of $21,520. 3. Sold equipment for $7,720 cash that had originally cost $42,720 and had $20,060 of accumulated depreciation. 4. Issued $14,000 of bonds payable at face value. Other information: a. All sales are credit sales. b. All credits to accounts receivable in the period are receipts from customers. c. All purchases of merchandise are on credit. d. All debits to accounts payable in the period result from payments for merchandise. e. Other operating expenses are cash expenses. f. Income taxes are cash expenses. Required: Prepare a statement of cash flows for 2020 using the direct method to report cash inflows and outflows from operating activities. (List any deduction in cash and cash outflows as negative amounts.) INSTANT BRAKE INC. Statement of Cash Flows For Year Ended December 31, 2020 Cash flows from operating activities: Cash flows from investing activities: Prepare a statement of cash flows for 2020 using the direct method to report cash inflows and outflows from operating activities. (List any deduction in cash and cash outflows as negative amounts.) INSTANT BRAKE INC. Statement of Cash Flows For Year Ended December 31, 2020 Cash flows from operating activities: Cash flows from investing activities Cash flows from financing activities
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