The comparative balance sheets of Myobaks, Inc. as at December 31 are given below:

Additional information:

1. Dividends declared and paid were $ 42,000.

2. Long-term notes payable was paid off at book value.

3. One piece of Equipment was acquired during the year.

4. The change in accumulated depreciation represents the net effect of depreciation expense charged to Income Statement as well as the accumulated depreciation removed on disposal during the year.

5. Only one piece of equipment was disposed at $29,700 during the year.

6. There are no non-cash investing/financing activities during the year.

Question:

a/ Prepare a statement of cash flows for Myobaks, Inc. for the year 2021 using the indirect method.

b/ In your own words, explain the treatment of the bad debt expense and allowance for doubtful accounts (not exceeding 150 words with a word count) in the cashflow statement above.

2021 85,680 72,850 2020 65,200 56,750 Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory Available for sale securities Equipment Accumulated Depreciation (7,285) 57,750 106,000 280,600 (80,600) 514,995 (5,675) 37,530 130,000 245,600 (97,600) 431,805 Accounts payable Income taxes payable Long term notes payable Common stock Retained earnings 47,175 15,240 59,200 253,000 140,380 514,995 49,775 12,240 79,200 190,000 100,590 431,805 Income Statement for Myobaks, Inc. for the year ended 31/12/2021 is appended: Sales 488,000 Cost of goods sold $212,540 Depreciation expense 43,000 Bad Debt expense 1,610 Other operating expenses 106,260 (363,410) Other gains (losses): Gain on sale of equipment 4,700 Interest expense (6,400) Income before taxes 122,890 Income taxes expense 41,100 Net income 81,790