work notes please. rk

Problem 23-06 Comparative balance sheet accounts of Pearl Inc. are presented below. PEARL INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2020 AND 2019 December 31 Debit Accounts 2020 2019 Cash $42,400 $33,900 Accounts Receivable 70,600 60,300 Inventory 30,100 24,100 Equity Investments 22,000 38,900 Machinery 30,300 18,700 Buildings 67,900 55,700 Land 7,600 7,600 $270,900 $239,200 Credit Accounts Allowance for Doubtful Accounts Accumulated Depreciation-Machinery Accumulated Depreciation-Buildings Accounts Payable Accrued Payables Long-Term Notes Payable Common Stock, no-par Retained Earnings $2,300 5,600 13,500 34,700 3,500 21,000 150,000 40,300 $270,900 $1,500 2,200 8,900 24,500 2,600 30,800 125,000 43,700 $239,200 Additional data (ignoring taxes): 1. Net Income for the year was $43,000. 2. Cash dividends declared and paid during the year were $21,400. 3. A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized. 4. Equity Investments (level of ownership is less than 20%) that cost $24,700 were sold during the year for $28,400. No unrealized gains and losses were recorded on these investments in 2020. 5. Machinery that cost $3,800, on which $750 of depreciation had accumulated, was sold for $2,250. Pearl's 2020 Income statement follows (Ignoring taxes). Sales revenue $540,400 Less: Cost of goods sold 381,000 Gross margin 159,400 Less: Operating expenses (Includes $8,750 depreciation and $5,042 bad debts) 119,300 Income from operations 40,100 Other: Gain on sale of Investments $3,700 Loss on sale of machinery (800) 2,900 Net Income $43,000 (a) Compute net cash flow from operating activities using the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net cash flow from operating activities (b) Prepare a statement of cash flows using the Indirect method. (Show amounts that decrease cash flow with either a-sign e.g. -15,000 or in parenthesis e.g. (15,000).) PEARL INC. Statement of Cash Flows (Indirect Method) Adjustments to reconcile net income to I 002