The Khan Group Balance Sheets at December 31 Assets	Current Year	Prior Year	Change	Classification-Financing , Investing Operating
Current Assets/Cash	$ 15,000.00	$ 12,000.00
Trade Investments at Fair Value	$ -	$ 30,000.00
Accounts Receivable , Net	$ 65,000.00	$ 35,000.00
Merchandise Inventory	$ 105,000.00	$ 115,000.00
Total Assets	$ 221,000.00	$ 192,000.00
Noncurrent Assets/ Investments in Affilate Companies	$ 161,500.00	$ 100,500.00
Property , Plant, and Equipment -Net	$ 1,533,050.00	$ 1,128,580.00
Intangible assets-Net	$ 95,200.00	$ 88,000.00
Total Noncurrent Assets	$ 1,789,750.00	$ 1,317,080.00
Total Assets	$ 2,010,750.00	$ 1,509,080.00
Liabilities Current Liabilities/ Current Portion of long term Debt	$ 6,000.00	$ 4,500.00
Accounts Payable	$ 87,500.00	$ 92,500.00
Divdends Payable	$ 5,000.00	$ -
Income Taxes Payable	$ 28,500.00	$ 30,000.00
Total Current Liabilities	$ 127,000.00	$ 127,000.00
Noncurrent Liabilities/ Bonds Payable	$ 425,000.00	$ 425,000.00
Less: Discount on Bonds	$ (87,500.00)	$ (100,250.00)
Notes Payable	$ 52,500.00	$ 10,000.00
Deferred Tax Liability	$ 3,750.00	$ 1,250.00
Net Obligations under Pension Plans	$ 45,000.00	$ 22,630.00
Total Noncurrent Liabilities	$ 438,750.00	$ 358,630.00
Total Liabilities	$ 565,750.00	$ 485,630.00
Shareholders' Equity	$ -
Common Stock $1 par value	$ 60,000.00	$ 50,000.00
Additional Paid-in Capital	$ 145,000.00	$ 13,500.00
Retained Earnings	$ 1,175,000.00	$ 781,850.00
Deferred Compensation	$ (10,000.00)	$ (12,900.00)
Accumulated other Comprehensive Income	$ 75,000.00	$ 69,500.00
Total Sharehlders' Equity	$ 1,445,000.00	$ 1,023,450.00
The Khan Group Income Statement For the Year Ended December 31
Current Year
Sales	$ 2,212,040.00
Cost of Goods Sold	$ 1,327,224.00
Gross profit		$ 884,816.00
Selling, General, and Administrative Expense		$ 43,000.00
Unrealized Losses		$ 3,600.00
Pension Expension	$ 210,500.00
Bad Debt	$ 1,500.00
Depreciation Expense	$ 17,700.00
Amoetization Expense	$ 6,750.00
Total Operating Expense		$ 283,050.00
Income before Interest and Taxes		$ 601,766.00
Interest Expense		$ (50,100.00)
Investment Income(include gain on sale)	$ 50,000.00
Equity Earnings from Affilate Companies	$ 118,500.00
Income Before Tax		$ 720,166.00
Income Tax Expense	$ (288,066.00)
Net Income		$ 432,100.00
*This column includes the account change and not necessarily the change in cash.
(a) Accumulated depreciation and amortization are changed by depreciation or amortization expense (operating) and plant asset and intangible asset disposals (investing).
(b) Retained earnings changes by net income or loss (operating) and dividends paid (financing).
(c) Undistributed equity income is reported as an adjustment in cash flows from operating activities
Additional Information:
Sale of Investments
Cash selling price
Less: Cost
Gain (Loss)
Direct Method
The Khan Group
Cash Flow Statement
For the Year Ended December 31
Operating Activities:
Cash Collected from Customers
Cash Paid for Merchandise
Cash Paid to Other Suppliers and Employees
Cash Paid for Interest
Cash Investment Income Received
Cash Paid for Taxes
Net Cash Provided by Operating Activities
Investing Activities:
Trading Securities Acquired
Trading Securities Sold
Purchased Equipment
Purchased Franchise
Net Cash Used by Investing Activities	$ -
Financing Activities:
Issued Long-term Debt
Cash Dividends Paid
Issued Common Stock
Net Cash Provided by Financing Activities
Increase in Cash for the Year
Beginning Cash Balance
Ending Cash Balance
Cash Flow Disclosures: Significant Noncash Investing and Financing Activities:
None
Definition of Cash Equivalents:
For purposes of the statement of cash flows, the company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents.
Reconciliation of Net Income to Net Cash Provided by Operating Activities
Operating Activities:
Net Income
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation Expense
Amortization Expense
Undistributed Equity Earnings
Unrealized Loss on the Trading Portfolio
Increase in Deferred Tax Liability
Pension Expense
Pension Contributions
Stock based Compensation Expense
Gain on Sale of Investments
Amortization of Discount on Bonds Payable
Bad Debt Expense
Changes in operating working capital accounts:
Increase in Accounts Receivable
Decrease in Inventory
Decrease in Accounts Payable
Decrease in Taxes Payable
Net Cash Provided by Operating Activities
Supporting computations for the cash flow statement line items are presented in the following t-accounts.
Investments at Fair Value			AOCI
		Beginning	$30,000
		Fair value adjustment
		Sales
		X = Purchased
		Ending
			Net Pension Obligation
Plant AssetsNet
		Beginning
		Depreciation expense
		X=Purchased / Sold
		Ending
Equity Investments			Retained Earnings
		Beginning
		Equity income
		X = Cash dividends
		Ending
Intangible AssetsNet			Tax Expense
		Beginning
		Amortization expense
		X = Franchise purchased / sold
		Ending
Current Portion of LTD			Tax Payable
		Beginning
		Payments / Borrowed
		Ending
Long-term Debt
		Beginning	Interest Expense
		X = Borrowing(report net borrowing after reclassification)
		X = Payments
		Ending
The derivation of the direct method line items is presented below.
Cash Collected From Customers	Amount
Sales
Less: Increase in Accounts Receivable
Less: Bad debt expense
Cash Collected From Customers
Cash Paid for Merchandise	Amount
Cost of Goods Sold
Deduct: Decrease in Inventory
Purchases (Accrual Basis)
Add: Decrease in Accounts Payable
Cash Paid for Merchandise
Cash Paid to Other Suppliers and Employees	Amount
Selling, General and Administrative Expenses
Less: Stock-based compensation
Add: Cash paid for pension funding
Cash Paid to Other Suppliers and Employees
Cash Paid for Interest	Amount
Interest Expense
Less: Discount amortization
Cash Paid for Interest
Cash Collected from Investment Income	Amount
Cash dividends from equity investments in affiliate companies
Add: Investment income
Less: Gain on sale included in investment income
Cash collected from investment income
Cash Paid for Income Taxes	Amount
Income Tax Expense
Add: Decrease in tax payable
Less: Increase in deferred tax liability
Cash Paid for Income Taxes