You are a loan officer for National Bank. You have a loan application submitted by a company for $50,000. This company just got a prior loan for $45,000 and has not made the first payment. This gives you an uneasy feeling as you examine a loan application from ABC, Co. The application included the following financial statements. ABC, Co. Income Statement For the Year Ended December 31, 2018 Sales revenue $100,000 Cost of goods sold (50,000) Depreciation expense (5,000) Remaining expenses (25,000) Net income $20,000 ABC, Co. Balance Sheet December 31, 2018 Cash $5,000 Accounts receivable 25,000 Inventory 20,000 Depreciable asset $55,000 Accumulated depreciation (5,000) Total $100,000 Accounts payable $10,000 Interest payable 5,000 Note payable 45,000 Common stock 20,000 Retained earnings 20,000 Total $100,000 It is not ABC's profitability that worries you. The income statement submitted with the application shows net income of $20,000 in the first year of operations. By referring to the balance sheet, you see that this net income represents a 20.00% rate of return on assets of $100,000. Your concern stems from the recollection that the note payable reported on ABC, Co's. balance sheet is a two-year loan you approved earlier in the year. You also recall another promising new company that, just last year, defaulted on another of your bank's loans when it failed due to its inability to generate sufficient cash flows to meet its obligations. Before requesting additional information from ABC, Co. you decide to prepare a statement of cash flows from the information available in the loan application. Required: 1. Write a Memo to the President of ABC, Co. of 200 - 300 words. 2. Prepare the statement of cash flows using the indirect method. All beginning balance sheet accounts are .00 3. Would you approve the loan or deny the loan? 4. What aspects of the financial statements would deny or merit the new loan? 5. You can use both financial statement analysis and any lending comments in your memo