Question 3: (25 marks) The following are the financial statements for Patel Johnstone Corporation which was compiled by their chief accountant. Patel Johnstone Corporation Income statement for the year ended 31 December 2017 P Sales 2 000 000 1 500 000 500 000 200 000 50 000 Cost of goods sold Gross profit Selling and administrative expenses Depreciation expense Operating profit (EBIT) Interest expense Earnings before tax (EBT) 230 000 20 000 210 000 Tax 99.500 Earnings after tax (EAT) Preference shares dividend 110 000 10 500 100 000 Earnings available for ordinary shareholders Shares outstanding Earnings per share 100 000 P1.00 Patel Johnstone Corporation Comparative statement of financial position 31 December Year-end 2016 Year-end 2017 P P Assets Noncurrent assets 1 000 000 1 100 000 550 000 600 000 450 000 500 000 20 000 50 000 Plant and equipment, original cost Less-accumulated depreciation Net plant and equipment Long term investment Current assets Inventory Accounts receivable Marketable securities Prepaid expenses Cash 180 000 200 000 160 000 170 000 10 000 30 000 10 000 20 000 30 000 40 000 400 000 450 000 Total current assets 870 000 1 000 000 Total assets Equity and liabilities Activate SCO 50 000 50 000 100 000 100 000 250 000 250 000 250 000 300 000 650 000 700 000 Equity Ordinary shares, P100 par value Preference shares, P1 par value Capital reserve Retained earnings Total equity Long term liabilities Bonds payable, 2022 Current liabilities Accounts payable Notes payable Accrued expenses Total current liabilities 40 000 90 000 45 000 80 000 100 000 100 000 35 000 30 000 180 000 210 000 870 000 1 000 000 Total equity and liabilities Required: Use the indirect method to prepare a cash flow statement for the year ended 31 December 2017 (25 marks)