Required:

a Prepare a statement of cash lows for the year ended 2019 using the indirect method.

b Briely explain why the net income of the company was positive although the cash lows of the company decreased in 2019.

The comparative statement of financial positions and statement of profit or loss of Chloe Electronics Limited are as follows: Chloe Electronics Limited Statement of financial positions / Balance sheets at 31 December 2019 2018 S Assets: Cash Accounts receivable Merchandise inventory Long-term investments Equipment Accumulated depreciation Total assets 234,534 64,360 146,250 111,800 551,000 (67,100) 1,040,844 246,080 58,800 123,420 112,800 291,000 (62,400) 769,700 Liabilities: Accounts payable Income taxes payable Bonds payable Total liabilities 113,654 21,450 97,500 232,604 80,760 20,400 132,000 233,160 Equity: Ordinary shares capital Retained earnings Total equity Total liabilities and equity 260,000 548,240 808,240 1,040,844 210,000 326,540 536,540 769,700 1,180,000 Chloe Electronic Limited Statement of profit or loss for the year ended 31 December 2019 Sales Cost of goods sold 361,800 Depreciation expense (Equipment) 58,800 Other operating expenses 96,000 Interest expense 4,000 Other gains (losses): Loss on sale of equipment Income before taxes Income taxes expense Net income (520,600) (16,800) 642,600 (55,300) 587,300 Additional Information: 1 There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. 2 Old equipment with an original cost of $75,500 was sold with a loss. 3 Additional ordinary shares were issued for cash