QUESTION $2(50$ points, $90$ minutes$)$

You have the following information about S & S INC.

S & S INC.

Balance sheet

At December $31,2016$

$20162015$

Assets

Current assets

Cash $$450,000$ $$75,000$

Short$-$term investments $50,000100,000$

Trade receivables, net $500,000350,000$

Merchandise inventory $837,0001,275,000$

Total current assets $1,837,0001,800,000$

Fixed assets

Land $150,00050,000$

Buildings $1,412,000750,000$

Accumulated amortization $-$ Buildings $(375,000)(200,000)$

Equipment $500,000500,000$

Accumulated amortization $-$ Equipment $(375,000)(375,000)$

Patents $145,000205,000$

Accumulated amortization $-$ Patents $(8,000)(21,000)$

Total fixed assets $1,449,000909,000$

Long$-$term investments

Portfolio investments $($shares$)650,000600,000$

Total assets $ $3,936,000$ $ $3,309,000$

Liabilities and shareholders' equity

Current liabilities

Bank loan $ $100,000$

Accounts payable $142,000209,000$

Income tax payable $30,000$

Total current liabilities $172,000309,000$

Long$-$term liabilities $950,000750,000$

Shareholders' equity

A shares $225,00025,000$

B shares $95,000150,000$

Retained earnings $2,494,0002,075,000$

Total shareholders' equity $2,814,0002,250,000$

Total liabilities and shareholders' equity $ $3,936,000$ $ $3,309,000$

S &S INC.

Results

For the year ended December $31,2016$

Sales $$1,496,000$

Gain on investment

Note $(2)15,000$

Cost of goods sold $563,000$

Expenses Amortization $292,000$

Other expenses $177,000$

Income taxes $30,000$

Expenses $(1062,000)$

Net income for the year $$449,000$

Other information

$1)$ On February $15,2016,$ the company sold a piece of equipment for $$15,000.$ This piece had cost $$30,000$ four years ago and was $50\%$ depreciated.

$2)$ On November $30,2016,$ S & S Inc. received $$15,000$ in dividends from a long$-$term investment.

$3)$ S & S Inc. borrowed $$200,000$ at $10\%.$ This debt matures on October $31,2022.$

$4)$ On December $31,2016,$ S & S Inc. wrote off from its books an old, fully depreciated warehouse, which had a cost of $$75,000$ in $1998($no longer of economic value$).$

$5)$ Also on December $31,2016,$ S & S Inc. paid dividends on Class A shares.

$6)$ The only other transactions that modified the Buildings and Equipment accounts were acquisitions made in October $2016.$

$7)$ Cash, short$-$term investments and bank loan are considered cash and cash equivalents by the Company.

$8)$ The balance of accounts payable arises from purchases of merchandise.

$9)$ Sale of a patent for $$20,000$ with a cost of $$60,000$ and accumulated amortization of $$40,000.$

Work to be performed

a$)$ Prepare a statement of cash flows for S & S Inc. for the year ended December $31,2016.$

Adopt the direct method of presentation. $($Demonstrate your calculations$)$