Question
P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow: E-PERFORM, INC. Statement of Financial Position December 31 2018 2017 Assets
P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow:
E-PERFORM, INC. Statement of Financial Position December 31 | ||
2018 | 2017 | |
Assets | ||
Cash | $ 97,800 | $ 48,400 |
Held for trading investments | 128,000 | 114,000 |
Accounts receivable | 75,800 | 43,000 |
Inventory | 122,500 | 92,850 |
Prepaid expenses | 18,400 | 26,000 |
Equipment | 270,000 | 242,500 |
Accumulated depreciation | (50,000) | (52,000) |
Total assets | $662,500 | $514,750 |
Liabilities and Shareholders' Equity | ||
Accounts payable | $93,000 | $77,300 |
Accrued liabilities | 11,500 | 7,000 |
Bank loan payable | 110,000 | 150,000 |
Common shares | 200,000 | 175,000 |
Retained earnings | 248,000 | 105,450 |
Total liabilities and shareholders' equity | $662,500 | $514,750 |
E-PERFORM, INC. Income Statement Year Ended December 31, 2018 | ||
Sales | $492,780 | |
Cost of goods sold | 185,460 | |
Gross profit | 307,320 | |
Operating expenses | 116,410 | |
Income from operations | 190,910 | |
Other revenues and expenses | ||
Unrealized gain on held for trading investments | $14,000 | |
Interest expense | (4,730) | 9,270 |
Income before income tax | 200,180 | |
Income tax expense | 45,000 | |
Net income | $155,180 |
Additional information:
- Prepaid expenses and accrued liabilities relate to operating expenses.
- An unrealized gain on held for trading investments of $14,000 was recorded.
- New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 long-term bank loan payable.
- Old equipment having an original cost of $57,500 was sold for $1,500.
- Accounts payable relate to merchandise creditors.
- Some of the bank loan was repaid during the year.
- A dividend was paid during the year.
- Operating expenses include $46,500 of depreciation expense and a $7,500 loss on disposal of equipment.
Instructions
(a) Prepare the statement of cash flows, using the direct method.
(b) E-Perform's cash position more than doubled between 2017 and 2018. Identify the primary reason(s) for this significant increase.
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