Instructions:

You are to prepare a statement of cash flows for the current year. Cash flows from operating activities are to be determined by the indirect method. Place brackets around dollar amounts representing cash outlays.

Transcribed image text: Q.1 You are the financial controller of ABC Limited. Your assistant has prepared an income statement for the current year and has developed the following additional information by analyzing changes in the company's balance sheet accounts. ABC LIMITED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Revenue: Net sales 9,900,000 Interest income 370,000 Gain on sales of marketable securities 90,000 Total revenue and gains 10,360,000 Costs and expenses: Cost of goods sold 4,960,000 Operating expenses (including depreciation of 800,000) 3,940,000 Interest expense 270,000 Income tax expense 300,000 Loss on sales of plant assets 90,000 Total costs, expenses, and losses 9,560,000 Net income 800,000 Changes in the company's balance sheet accounts over the year are summarized as follows: 1. Accounts Receivable decreased by 90,000. 2. Accrued Interest Receivable increased by 20,000. 3. Inventory decreased by 290,000, and Accounts Payable to suppliers of merchandise decreased by 250,000. 4. Short-term prepayments of operating expenses decreased by 22,000, and accrued liabilities far onerating evnenses increased by 37 000 by 250,000. 4. Short-term prepayments of operating expenses decreased by 22,000, and accrued liabilities for operating expenses increased by 37,000. 5. The liability for Accrued Interest Payable decreased by 19,000 during the year. 6. The liability for Accrued Income Taxes Payable increased by 35,000 during the year. 7. The following schedule summarizes the total debit and credit entries during the year in other balance sheet accounts: Debit Credit Entries Entries Marketable Securities. 120,000 210,000 Notes Receivable (cash loans made to others) 250,000 190,000 Plant Assets (see paragraph 8) 3,800,000 360,000 Notes Payable (short-term borrowing) .620,000 740,000 Bonds Payable 1,100,000 Capital Stock 50,000 Additional Paid-in Capital (from issuance of stock) 840,000 Retained Earnings (see paragraph 9) 320,000 800,000 8. The 360,000 in credit entries to the Plant Assets account is net of any debits to accumulated depreciation when plant assets were retired. Thus, the 360,000 in credit entries represents the book value of all plant assets sold or retired during the year. 9. The 320,000 debit to Retained Earnings represents dividends declared and paid during the year. The 800,000 credit entry represents the net income for the year. 10. All investing and financing activities were cash transactions. 11. Cash and cash equivalents amounted to 500,000 at the beginning of the year. Instructions: E