Question 3 The financial statements of Sun Company for 2017 are set out below. Sun Company Balance Sheets at December 31 2017 2016 $85,600 72,850 157,750 6,080 280,600 (80,600) $522,280 $65,200 56,750 144,850 12,680 245,600 (97,600) $427,480 Assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Equipment Accumulated depreciation-Equipment Total assets Liabilities: Accounts payable Income taxes payable Notes payable (long term) Total liabilities Equity: Common stock Retained earnings Total equity Total liabilities and equity $52,850 15,240 59,200 $127,290 $45,450 12,240 79,200 $136,890 190,000 253,000 141.990 $394.990 $522.280 100.590 $290,590 $427.480 $488,000 Sun Company Income Statement for Year Ended December 31, 2017 Sales Cost of goods sold $212,540 Depreciation expense 43,000 Other operating expenses 106,260 Interest expense 6.400 Other gains (losses): Gain on sale of equipment Income before taxes Income taxes expense Net income (368,200) 4.700 124,500 41.100 $83.400 Additional Information 1. A $20,000 note payable is retired at its carrying value in exchange for cash. 2. The only changes affecting retained earnings are net income and cash dividends paid. 3 New equipment is acquired for $120,000 cash. 4. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. 5. Prepaid expenses relate to Other Expenses on the income statement. 6. All purchases and sales of merchandise inventory are on credit. Required: (a) Prepare a statement of cash flows for the year ended December 31, 2017 using the indirect method in compliance with either US GAAP or IFRS. (15 marks) (b) Comment on the following statement: Cash balance is the most reliable figure in financial statements which cannot be easily manipulated.")