May Hashimi, the president of Hashimi Print Gallery is examining the following income statement, which has just been handed to her by her accountant, Lou Klein.

Income statement
Net Sales	884,000
Cost of goods sold	508,000
Gross margin	376,000
Operating expenses (including Depr. Exp 20,000)	204,000
Operating income	172,000
Interest expense	24,000
Income before income tax	148,000
Income tax	28,000
Net Income	120,000

After looking at the statement, Hashimi said to Klein, Lou, the statement seems to be well done, but what I need to know is why I do not have enough cash to pay my bills this month. You show that I earned 120,000 in 20X2, but I only have 24,000 in the bank. I know I bought a building on mortgage and paid cash dividend of 48,000, but what else is going on?. Lou replied, To answer that question, we have to look at comparative Balance Sheets and prepare a cash flow statement, take a look at those Balance Sheets

Balance Sheet
	20X2	20X1
Assets
Cash	24,000	40,000
Account receivable (net)	178,000	146,000
Inventory	240,000	180,000
Prepaid expenses	10,000	14,000
Building	400,000
Accumulated depreciation	(20,000)
Total Assets	832,000	380,000
Liabilities and OE
Accounts payable	74,000	96,000
Income tax payable	6,000	4,000
Mortgage payable	400,000
Common stock	200,000	200,000
Retained earnings	152,000	80,000
Total Liabilities and OE	832,000	380,000

1). Prepare cash flow statement

2). Hashimi Print Gallery has cash problem despite profitable operations. Why?