PROBLEM 2. Chewy Dewey, the managing partner, at the infamous investment banking firm, DEWEY, CHEATUM & HOWE, asks you to prepare a cash flow statement for the fiscal year ended, January 31, 2019 of Bengali Imports, Inc., using the indirect method. The comparative balance sheets for Bengali Imports, Inc. as of January 31 are presented below. Bengali Imports, Inc. Comparative Balance Sheets January 31 Assets 2019 2018 Cash $ 59,520 $ 45,000 Accounts receivable 44,000 62,000 Inventory 154,550 142,000 Prepaid expenses 15,280 21,000 Land 145,000 130,000 Buildings 200,000 200,000 Accumulated depreciation-buildings (60,000) (40,000) Equipment 228,000 155,000 Accumulated depreciation-equipment (45,000) (35,000) Total $741,350 $680,000 Liabilities and Stockholders' Equity Accounts payable 46,350 $ 40,000 Bonds payable 300,000 300,000 Common stock, $1 par 195,000 160,000 Retained earnings 200,000 180.000 Total $741,350 $680,000 Additional information: 1. Operating expenses include depreciation expense of $40,000. 2. Land was sold for cash at book value of $20,000. 3. Cash dividends of $25,000 were paid. 4. Net income for 2019 was $45,000. 5. Equipment was purchased for $95,000 cash. In addition, equipment costing $22,000 with a book value of $12,000 was sold for $6,000 cash. 6. Issued 35,000 shares of $1 par value common stock in exchange for land with a fair value of $35,000. Instructions: Prepare a statement of cash flows for the year ended January 31, 2019, using the indirect method and complete the statement in good form.PROBLEM 1. You work for a prominent investment banking firm, DEWEY, CHEATUM & HOWE. One of your most important clients, Maurice Howard, comes to you for investment advice regarding two top tier pet stores, EDDIE'S PET SUPPLY COMPANY and MILLIE'S PETS, INC. The Eddie's market price per common share is $100 and Millie's is $90 per common share. There is no preferred stock. You gathered the following financial information for the year ended, February 29, 2020. EDDIE'S MILLIE'S Income Statement Data for the year ended Net sales $67,390 $405,046 Cost of goods sold 45,725 304,657 Selling and administrative expenses 13,469 79,607 Interest expense 757 1,884 Other income (expense) (2,944) 2,576 Income tax expense 1,575 7,139 Net income $ 2,920 $ 14,335 Balance Sheet Data (02/29/2020) Current assets $17,213 $ 48,331 Noncurrent assets 26,492 122,375 Total assets $43,705 $170,706 Current liabilities $10,070 $ 55,561 Long-term debt 18,148 44,396 Total stockholders' equity 15,487 70,749 Total liabilities and stockholders' equity $43,705 $170,706 EDDIES MILLIE'S Beginning-of-Year Balances Total assets $44,533 $163,429 Total stockholders' equity 15,347 65,285 Current liabilities 11,327 55,390 Total liabilities 29,186 98,144 Other Data Average net accounts receivable $ 6,560 $ 4,025 Dividends per common share $ 10 $ 20 Average common shares outstanding 5,000 7,500 Instructions: Using all of the financial analysis tools leamed in Chapter 17 and based upon your complete analysis, which entity do you recommend to Maurice Howard, as the best investment? Maurice Howard insists upon seeing all of your calculations as proof of your recommendation
