Question #2- Statement of Cash Flows

Required:

Prepare the STATEMENT OF CASH FLOWS using the indirect method for the year ended December 31, 2020. Additional information includes the following:

a. A note is retired at carrying value

b. The only changes affecting retained earnings during 2020 are profit and cash dividends paid.

c. New equipment is acquired during 2019 for $70,320

d. The profit on sale of equipment costing $58,320 during 2019 is $2,400

The Western Corporation 2019 and 2020 Balance Sheets included the following items:

The Western Corporation

Comparative Balance Sheets

As of December 31st, 2019 and 2020

2020

2019

Cash

90,960

42,000

Accounts Receivable

96,000

74,400

Merchandise Inventory

80,160

116,160

Prepaid expenses

6,480

6,240

Equipment

156,000

144,000

TOTAL ASSETS

429,600

382,800

Accumulated Depreciation, Equipment

33,600

12,000

Accounts Payable

31,200

38,400

Wages payable

8,400

19,200

Taxes Payable

2,880

4,320

Notes payable (long-term)

48,000

84,000

Common Shares, no-par value

276,000

216,000

Retained Earnings

29,520

8,880

TOTAL LIABILITIES & EQUITY

429,600

382,800

The Western Corporation Income Statement was as follows:

The Western Corporation

Income Statement

For The Year Ended December 31st, 2020

Revenue:

Sales

786,000

Cost Of Goods Sold

478,800

Gross Profit

$307,200

Depreciation Expenses:

70,320

Other Expense

80,400

Total Operating Expense

150,720

Profit from operations

156,480

Gain on Sale of equipment

2,400

Profit before Taxes

158,880

Income Taxes

54,768

NET INCOME

104,112