Natalie has prepared the balance sheet and income statement of Cookie & Coffee Creations Inc. for the first year of operations, but does not understand how to prepare the cash flow statement. The income statement and balance sheet appear below. Recall that the company started operations on November 1, 2018, so all of the opening balances are zero. Additional information: 1. The company bought kitchen equipment (a commercial oven) for $29,000 on November 1, 2018, and signed a $12,000 note payable to help pay for it. The terms provide for semiannual fixed principal payments of $2,000 on May 1 and November 1 of each year, plus interest of 5%. All other furniture, fixture, and equipment were purchased during the year for cash. 2. Recall from Chapter 11 that The company originally issued 25,930 common shares for $25,930, of which 750 shares were repurchased from the lawyer for $500. COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2019 Sales revenue $462,500 Cost of goods sold 231,250Gross profit2 31,250Operating expenses Salaries and wages expense $92,500 Depreciation expense3,900 Other operating expenses 35,987 132,387Income from operations 98,863Other expenses Interest expense 413I Income before income tax 98,450 Income tax expense 19,690 Net income $78,760

COOKIE & COFFEE CREATIONS INC.Balance SheetOctober 31, 2019 Assets Current assets Cash $86,219 Accounts receivable 3,250 Inventory 17,897 Prepaid expenses 6,300 $113,666

Property, plant, and equipment Furniture and fixtures $12,500 Accumulated depreciationfurniture and fixtures (1,250 ) 11,250 Computer equipment 4,200 Accumulated depreciationcomputer equipment (600 ) 3,600 Kitchen equipment 29,000 Accumulated depreciationkitchen equipment (2,050 ) 26,950 41,800 Total assets $155,466

Liabilities and Stockholders' Equity Current liabilities Accounts payable $5,848 Income tax payable 19,690 Dividends payable 700 Salaries and wages payable 2,250 Interest payable 188 Note payablecurrent portion 4,000 $32,676 Long-term liabilities Note payablelong-term portion 6,000 Total liabilities 38,676 Stockholders' equity Paid-in capital Preferred stock, 2,800 shares issued and outstanding $14,000 Common stock, 25,930 shares issued, 25,180 shares outstanding 25,930 39,930 Retained earnings 77,360 Total paid-in capital and retained earnings 117,290 Less: Treasury stock (750 common shares) 500 Total stockholders equity 116,790 Total liabilities and stockholders' equity $155,466

3.		Recall from Chapter 11 that the company declared a semiannual dividend to the preferred stockholders on April 30, and the dividend was paid on June 1. The second semiannual dividend was declared to the preferred stockholders on October 31, to be paid on December 1.
4.		Prepaid expenses relate only to operating expenses. ANSWER: Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2019, using the indirect method. ANSWER: Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2019, using the direct method. (Show