QUESTION 5 (Points 30)

5. The accounting staff of Sparks INC has assembled the following information for the year ended December 31, 2019:

5.1. Prepare a statement of cash flows in the format Example below (Allison corporation) Place brackets around amounts representing cash outflows. Use the direct method of reporting cash flows from operating activities.

5.2. Some of the items above will be listed in your statement without change. However, you will have to combine certain given information to compute the amounts of 5.2.1. collections from customers, 5.2.2. cash paid to suppliers and employees, and

5.2.3. proceeds from sales of plant assets. (Hint: Not every item listed is used in preparing a statement of cash flows.) Example of a statement of cash flow format:

QUESTION 6 (Points 30)

6. Comparative balance sheets report average total assets for the year of $2,575,000 and average total equity of $1,917,000 (dollar amounts in thousands, except earnings per share).

Sparks INC STATEMENT OF EARNINGS FOR THE YEAR ENDING DECEMBER 31, 2019

Net Sales ...... $4,395,253 Costs and expenses: ......

Costs of goods sold ...... (2,821,455) Operating expenses ...... (1,004,396) Interest revenue ...... 15,797

Earnings before income tax ...... $585,199 Income tax expense ...... (204,820) Net earnings ...... $380,379 Earnings per share ...... $1.70

1. 6.1. Prepare an income statement for the year in a multiple-step format.

   Compute the following:

2. 6.2. Gross profit rate,

3. 6.3. Net income as a percentage of net sales,

4. 6.4. Return on assets, and

5. 6.5. Return on equity for the year.

(Round computations to the nearest one-tenth of 1 percent.)

6.6. Explain why interest revenue is not included in the company's gross profit computation. .....END....