Scenario:

The comparative balance sheet and income statement of Sign Language Hearing Co Ltd, have just been prepared and presented to the owners by the companys Accountant. The owners are concerned about the movement in the companys cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners.

The owners have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial.

Financial info to be used by surnames with initials (K, Q, M, F)

Sign Language Hearing Co Ltd
Comparative Balance Sheet
October 31, 2020, and 2021
	2021	2020
Assets
Cash and cash equivalent	320,000	275,000
Accounts Receivable	180,000	240,000
Prepaid expenses	240,000	220,000
Equipment, net	350,000	210,000
Total Assets	1,090,000	945,000
Liabilities
Accounts payable	305,000	285,000
Accrued liabilities	285,000	305,000
Bond payable	195,000	95,000
Stockholders' Equity:
Common Stock	95,000	55,000
Retained earnings	350,000	255,000
Treasury stock	(140,000)	(50,000)
Total liabilities and stockholders' equity	1,090,000	945,000

Sign Language Hearing Co Ltd
Income Statement
Year Ended October 31,2021
Revenues and gains:
Sales revenue	850,000
Gain on sale of equipment
Interest revenue	2,500
Total revenues and gains		852,500
Expenses
Cost of goods sold	465,500
Salary expense	65,500
Depreciation expense	24,000
Rent expense	49,500
Loss on sale of equipment	2,500
Total expenses		607,000
Income before income taxes		245,500
Income tax expense		38,000
Net Profit		207,500
Notes
Purchase of equipment		243,000
Cash receipt from sale of equipment		76,500
Issuance of bonds payable to borrow cash		100,000
Cash receipt from issuance of common stock		40,000
Dividend paid		112,500
Book value of equipment sold		79,000
Purchase of treasury stock		90,000

Requirements

1. In comparison to investing and financing activities, it is often said that cash from operating activities must be the main source of cash to achieve long term success of the company. Do you agree or disagree with this statement? In your own words, give reason or reasons to support your answer taking into consideration the possible consequences of the cash being provided by any of the other two activities over the long run.

2. Prepare a complete statement of cash flows for October 2021 using the indirect method based on the information and guidance provided above.