The balance sheet and income statement of Helen Limited are as follows: Helen Limited Balance Sheet As at 31 December 2020 2019 Current assets $ $ Cash 1,299,000 1,134,000 Accounts receivable 355,000 256,000 Inventories 460,000 400,000 Prepaid rent 30,000 50,000 Total current assets 2,144,000 1,840,000 Non-current assets Investment 400,000 300,000 Plant and equipment 1,320,000 950,000 Less: Accumulated depreciation Plant and equipment 500,000 400,000 Total non-current assets 1,220,000 850,000 Total assets 3,364,000 2,690,000 Current liabilities Accounts payable 260,000 296,000 Rent payable 136,000 126,000 Income taxes payable 180,000 220,000 Short-term note payable 50,000 20,000 Dividend payable 40,000 30,000 Total current liabilities 666,000 692,000 Non-current liabilities Long-term bank loan payable 700,000 600,000 Total liabilities 1,366,000 1,292,000

Stockholders equity Common stock and additional paid-in capital 1,100,000 800,000 Less: Treasury stock 80,000 50,000

Retained earnings 978,000 648,000 Total equity 1,998,000 1,398,000 Total liabilities and equity 3,364,000 2,690,000 Helen Limited Income Statement For Year Ended 31 December 2020 $ Sales revenue 2,500,000 Cost of goods sold 1,400,000 Gross profit 1,100,000 Other income: Gain on sales of plant and equipment 500,000 Expenses: Rent expense 400,000 Impairment loss on plant and equipment 10,000 Depreciation expenses 400,000 Interest expense 27,000 Income tax expense 10,000 Net income 753,000 Other information is as follows: (1) Cash dividends were declared during the year. (2) Helen Ltd paid $30,000 for long-term bank loan payable (3) Helen Ltd declared and distributed 10,000 shares of common stock as stock dividends to stockholders in this year. The par value is $1 per share. The market value is $3 per share. The stock dividend was classified as small stock dividend. (4) Helen Ltd sold plant and equipment in this year. The cost of plant and equipment sold was $600,000. The company received shares of the sellers common stock as part of the payment. The amount of common stock received had been recorded in investment account. The remaining balance for the plant and equipment sold had been received in cash. Helen Ltd did not purchase additional investment nor sell investment in this year. (5) Helen Ltd purchased plant and equipment in this year. 10 percent of the cost of plant and equipment purchased was settled by issuing common stock. 90 percent of the cost of plant and equipment purchased was settled by paying cash. Required: (a) Prepare a statement of cash flows using indirect method for the year ended 2020. Show your calcuations. (30 marks) (b) An accountant of Helen Ltd stated that once the company is making a profit or income, the company will not go bankrupt. Do you agree? Explain your answer. (5 marks) (c) Currently, the credit terms of customers are approved by sales department. The accountant suggested that this is the best way to approve credit terms. Do you agree? Explain your answer and provide one recommendation to improve credit approval process.