Question 2 The following information relates to Oswald Ltd for their fiscal year ended December 31, 20X1: Comparative Statement of Financial Position Dec 31/X1 Dec 31/X0 Cash.............. $51,000 $24,000 Accounts receivable (see note 1).. 45,000 27,000 Merchandise inventory....... 28,000 30,000 FV-NI investment (see note 2). 50,000 42,000 Property, plant and equipment (see note 3) ...... $76,000 $ 120,000 Less accumulated depreciation.................... (40,000) 36,000 (38,000) 82,000 Total Assets $210,000 $205,000 Accounts payable... Unearned revenue. Income taxes payable Warranty liability (see note 4). Note payable (see note 5)... Common shares....... $ 22,000 $12,000 10,000 5,000 44,000 49,000 7,000 4,000 45,000 75,000 30,000 27,000 Retained earnings (see note 6)...... Total Liabilities & Shareholders' Equity 52,000 33,000 $210,000 $205,000 Sales........ Cost of sales Gross profit.. Operating expenses Income from operations. Income Statement For the Year Ended December 31, 20X1 $ 1,050,000 (894,000) 156,000 (79,000) 77,000 (21,000) Other income/expense; gains and losses (see note 7). Income before taxes Income taxes.... Net income..... 56,000 (12,000) $44,000 1. Accounts receivable is presented net of Allowance for Doubtful Accounts of $4,000 (20X0: $3,000). Bad debt expense was $6,000 in 20X1 and included in "operating expenses". Bad debt expense is will need to be deducted to arrive at cash received from customers (in addition to adjusting for the change in net A/R) and will be deducted from operating expenses to arrive at cash paid for operating expenses. 2. FV-NI investments of $20,000 were purchased during the year. There were no disposals. As short- term investments, FV-NI investments are included as operating cash flows. 3. Equipment with a cost of $44,000 and book value of $36,000 was sold for cash proceeds of $30,000. Losses on PPE are included in 'other income/expense; gains and losses', and depreciation expense is categorized as 'operating expenses'. 4. Warranty is accounted for using the expense approach (i.e. changes to the warranty affect warranty expense which is an operating expense). The change in warranty liability will adjust cash paid for operating expenses. 5. Note payable of $30,000 was repaid during the year. BUS385 Lab 3 (Winter 2022): Statement of Financial Position and Statement of Cash Flows 6. Dividends of $25,000 were declared and paid during the year. 7. Other income/expense; gains and losses includes interest expense, loss on sale of equipment, and revaluation of FV-NI investments. Total interest expense for the year was $3,000. Required: Prepare Oswald's statement of cash flows for 20X1 using the direct method.