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This is the question PCC Inc. is an importer and distributor of computer chips (integrated circuits used in computers). PCC started business this year. During

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PCC Inc. is an importer and distributor of computer chips (integrated circuits used in computers). PCC started business this year. During its first year, 2000, PCC received three large shipments of chips from suppliers in Asia and sold those chips to small computer assemblers and retailers. PCC employs several buyers and salespeople. During the com- pany's first year the cost of chips fell substantially, but its selling prices so far have declined only slightly. Inventory and preliminary financial information related to PCC are given below. Sales $ 168 Inventory Information Cost of sales Inventory purchased during the year 2000: Gross profit Purchase January 1 1,000 chips at $50 each Operating expenses 30 Purchase 2 June 30 1,000 chips at $40 each Selling expenses Purchase 3 September 30 1,000 chips at $32 each Amortization expense Sales during 2000: Interest expense January to June 800 chips at $100 each Net income before income taxes July to September 700 chips at $100 each Income taxes November and December 200 chips at $90 each Net income On hand at year end: 1,300 chips Required: Preliminary Financial Information Prepare a statement of cash flow. Year ended December 31, 2000 Comment on the information this statement provides to the users of PCC's financial Assets statements. Cash $ 13 Accounts receivable 35 Inventory 44 Prepaid expenses 18 Equipment, at cost 100 Less accumulated amortization 10 Equipment, net book value 90 Total assets $200 Liabilities Accounts payable $ 22 Bank Loan - long-term Shareholder's equity Common shares issued 130

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