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Question 3: (19 points)

Quality Kitchen Companys 2021 single-step income statement and comparative balance sheet are provided below:

QUALITY KITCHEN COMPANY

Income Statement

Year Ended December 31, 2021

Revenue................................................................................................................... $ 920,000

Expenses

Cost of goods sold......................................................................... $ 493,500

Salaries............................................................................................... 189,000

Other operating expense ................................................................... 73,500

Depreciation expense........................................................................ 25,000

Interest.................................................................................................. 13,000

Income taxes....................................................................................... 18,000 812,000

Profit.......................................................................................................................... $ 108,000

QUALITY KITCHEN COMPANY

Balance Sheet

December 31

2021 2020

Assets

Cash.......................................................................................................... $ 14,000 $ 10,000

Accounts receivable................................................................................... 29,000 24,000

Inventory...................................................................................................... 13,500 17,000

Prepaid expenses......................................................................................... 2,000 2,000

Land............................................................................................................ 250,000 250,000

Building and equipment cost............................................................... 497,000 422,000

Accumulated depreciation.................................................................... (150,000) (125,000)

Total assets..................................................................................... $ 655,500$ 600,000

Liabilities and Shareholders' Equity

Accounts payable.................................................................................... $ 25,900 $ 22,400

Taxes payable............................................................................................... 1,000 3,000

Interest payable............................................................................................. 1,500 2,500

Salaries payable............................................................................................ 8,000 5,000

Long-term debt......................................................................................... 234,000 260,000

Common shares....................................................................................... 120,000 100,000

Retained earnings.................................................................................... 265,100 207,100

Total liabilities and shareholders' equity.................................... $ 655,500$ 600,000

Additional information:

1. No new long-term debt was taken during the year.

2. New equipment was purchased, and none was sold.

3. Common shares were issued for cash.

4. Cash dividends were paid to common shareholders.

5. All operating expenses were paid in the period incurred.

Required: Prepare the cash flow statement for 2021, using the direct method.