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question 3. P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow: E-PERFORM, INC. Statement of Financial Position December 31 2018

question 3. P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow:

E-PERFORM, INC.

Statement of Financial Position

December 31

2018

2017

Assets

Cash

$ 97,800

$ 48,400

Held for trading investments

128,000

114,000

Accounts receivable

75,800

43,000

Inventory

122,500

92,850

Prepaid expenses

18,400

26,000

Equipment

270,000

242,500

Accumulated depreciation

(50,000)

(52,000)

Total assets

$662,500

$514,750

Liabilities and Shareholders' Equity

Accounts payable

$93,000

$77,300

Accrued liabilities

11,500

7,000

Bank loan payable

110,000

150,000

Common shares

200,000

175,000

Retained earnings

248,000

105,450

Total liabilities and shareholders' equity

$662,500

$514,750

E-PERFORM, INC.

Income Statement

Year Ended December 31, 2018

Sales

$492,780

Cost of goods sold

185,460

Gross profit

307,320

Operating expenses

116,410

Income from operations

190,910

Other revenues and expenses

Unrealized gain on held for trading investments

$14,000

Interest expense

(4,730)

9,270

Income before income tax

200,180

Income tax expense

45,000

Net income

$155,180

Additional information:

  1. Prepaid expenses and accrued liabilities relate to operating expenses.
  2. An unrealized gain on held for trading investments of $14,000 was recorded.
  3. New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 long-term bank loan payable.
  4. Old equipment having an original cost of $57,500 was sold for $1,500.
  5. Accounts payable relate to merchandise creditors.
  6. Some of the bank loan was repaid during the year.
  7. A dividend was paid during the year.
  8. Operating expenses include $46,500 of depreciation expense and a $7,500 loss on disposal of equipment.

Instructions

(a) Prepare the statement of cash flows, using the direct method.

(b) E-Perform's cash position more than doubled between 2017 and 2018. Identify the primary reason(s) for this significant increase.

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