The income statement and unclassified statement of financial position for Blossom, Inc. follow: BLOSSOM, INC. Statement of Financial Position December 31 Assets 2018 2017 Cash Held for trading investments Accounts receivable $97,000 $47,000 120,000 112,000 70,000 40,000 122,000 92,800 18,000 26,000 265,000 240,000 (45,000) (52,000) $647,000 $505,800 Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation Total assets Liabilities and Shareholders' Equity Accounts payable Accrued liabilities Bank loan payable Common shares Retained earnings Total liabilities and shareholders' equity $90,000 10,000 107,000 200,000 240,000 $647,000 $70,000 7,000 173,800 150,000 105,000 $505,800 BLOSSOM, INC. Income Statement Year Ended December 31, 2018 Sales Cost of goods sold Gross profit Operating expenses Income from operations Other revenues and expenses Unrealized gain on held for trading investments Interest expense Income before income tax $492,000 185,400 306,600 116,400 190,200 $8.000 (4,700) 3,300 Income tax expense 193,500 40,000 $153,500 Net income Additional information: 1. 2. 3. 4. Prepaid expenses and accrued liabilities relate to operating expenses. An unrealized gain on held for trading investments of $8,000 was recorded. New equipment costing $80,000 was purchased for $20,000 cash and a $60,000 long-term bank loan payable. Old equipment having an original cost of $55,000 was sold for $1,000. Accounts payable relate to merchandise creditors. Some of the bank loan was repaid during the year. A dividend was paid during the year. Operating expenses include $46,000 of depreciation expense and a $1,000 loss on disposal of equipment. 5. 6. 7. 8. Prepare the statement of cash flows, using the direct method. (Show amounts that decrease cash flow with either a-sign e.g.-15,000 or in parenthesis e.g. (15,000).) BLOSSOM, INC. Statement of Cash Flows-Direct Method Year Ended December 31, 2018 Cash flows from operating activities Cash receipts from customers $ Cash Payments To suppliers $ For operating expenses For interest For income taxes Net cash provided by operating activities Cash flows from investing activities $ Purchase of equipment Purchase of equipment Net cash used by investing activities Cash flows from financing activities Sale of common shares $ Repayment of bank loan payable Payment of cash dividends Net cash used by financing activities Net increase in cash Cash, January 1 Cash, December 31 $ by Note X to the Statement of Cash Flows: During the year, the company purchased equipment costing $ paying $20,000 cash and issuing a $60,000 bank loan payable