Scruggs Inc.

Income Statement

For the Year Ended December 31, 2018

Sales

1,500,000

Cogs

850,000

Gross profit

650,000

Operating expenses

90,000

Depreciation expense

70,000

Depletion expense

7,500

Amortization expense

2,500

Operating income

480,000

Loss on sale of stock

(6,500)

Gain on sale of bonds

12,000

Gain on sale of equipment

5,000

Interest expense

(3,500)

Income tax expense

(12,500)

Net income

474,500

Prepare a full statement of cash flows using the indirect method.

Prepare the operating section of the statement of cash flows using the direct method.

Comment on the amount of dividend payout.

Comment on areas of opportunity.

Additional Information:

1.) Purchased 50,000$ of equipment by issuing $20,000 of common stock and paying $30,000 in cash

2. ) Sold equipment with a cost of $40,000 and accumulated depreciation of $10,000

3.) Sold common stock for cash.