Question 4 The comparative balance sheets of Myobaks, Inc. as at December 31 are given below: 2021 2020 Cash 85,680 65,200 Accounts receivable 72,850 56,750 Allowance for doubtful accounts (7,285) (5,675) Merchandise inventory 57,750 37,530 Available for sale securities 106,000 130,000 Equipment 280,600 245,600 Accumulated Depreciation (80,600) (97,600) 514,995 431,805 47,175 49,775 Accounts payable Income taxes payable Long term notes payable 15,240 12,240 59,200 79,200 Common stock 253,000 190,000 Retained earnings 140,380 100,590 514,995 431,805 Income Statement for Myobaks, Inc. for the year ended 31/12/2021 is appended: Sales 488,000 Cost of goods sold $212,540 Depreciation expense 43,000 Bad Debt expense 1,610 Other operating expenses 106,260 (363,410) Other gains (losses): Gain on sale of equipment 4,700 Interest expense (6,400) Income before taxes 122,890 41,100 Income taxes expense Net income 81,790 Additional information: 1. Dividends declared and paid were $ 42,000. 2. Long-term notes payable was paid off at book value. 3. One piece of Equipment was acquired during the year. 6 4. The change in accumulated depreciation represents the net effect of depreciation expense charged to Income Statement as well as the accumulated depreciation removed on disposal during the year. 5. Only one piece of equipment was disposed at $29,700 during the year. 6. There are no non-cash investing/financing activities during the year. Required: a/ Prepare a statement of cash flows for Myobaks, Inc. for the year 2021 using the indirect method. (11 marks) b/ In your own words, explain the treatment of the bad debt expense and allowance for doubtful accounts (not exceeding 150 words with a word count) in the cashflow statement above. (4 marks)