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 2 000 000 Sales 1 500 000 500 000 200 000 Cost of goods sold Gross profit Selling and administrative expenses Depreciation expense Operating profit (EBIT) 50 000 250 000 20 000 Interest expense 210 000 Earnings before tax (EBT) Page 10 of Tax 99 500 Earnings after tax (EAT) 110 000 Preference shares dividend 10 500 Earnings available for ordinary shareholders 100 000 Shares outstanding 100 000 Earnings per share P1.00 Patel Johnstone Corporation Comparative statement of financial position 31 December Year-end 2016 Year-end 2017 P P Assets 1 000 000 1 100 000 550 000 600 000 450 000 500 000 20 000 50 000 Noncurrent assets 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 160 000 180 000 170 000 200 000 10 000 10 000 30 000 20 000 30 000 40 000 Total current assets 400 000 450 000 Total assets 870 000 1 000 000 Equity and liabilities 50 000 50 000 Equity Ordinary shares, P100 par value Preference shares, P1 par value Capital reserve Retained earnings 100 000 250 000 100 000 250 000 300 000 250 000 Total equity 650 000 700 000 Long term liabilities Bonds payable, 2022 40 000 90 000 Current liabilities 45 000 80 000 Accounts payable Notes payable 100 000 100 000 35 000 30 000 Accrued expenses 180 000 210 000 Total current liabilities 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)