Flounder Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:
| FLOUNDER INC. Comparative Statement of Financial Position December 31 |
|||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
|
Cash |
$ 52,735 | $ 25,050 | |||||
|
Accounts receivable |
58,040 | 51,080 | |||||
|
Inventory |
40,050 | 60,060 | |||||
|
Prepaid rent |
5,240 | 4,120 | |||||
|
Equipment |
156,690 | 130,100 | |||||
|
Accumulated depreciation–equipment |
( 35,240 | ) | ( 25,120 | ) | |||
|
Goodwill |
18,000 | 58,000 | |||||
|
Total assets |
$ 295,515 | $ 303,290 | |||||
|
Accounts payable |
$ 46,290 | $ 40,100 | |||||
|
Income tax payable |
4,050 | 6,060 | |||||
|
Salaries and wages payable |
8,050 | 4,050 | |||||
|
Short–term loans payable |
8,040 | 10,080 | |||||
|
Long–term loans payable |
58,000 | 77,000 | |||||
|
Common shares |
130,000 | 130,000 | |||||
|
Retained earnings |
41,085 | 36,000 | |||||
|
Total liabilities and shareholders’ equity |
$ 295,515 | 303,290 | |||||
| FLOUNDER INC. Income Statement Year Ending December 31, 2020 |
|||||
|---|---|---|---|---|---|
|
Sales revenue |
$ 347,925 | ||||
|
Cost of goods sold |
165,000 | ||||
|
Gross margin |
182,925 | ||||
|
Operating expenses |
120,000 | ||||
|
Operating income |
62,925 | ||||
|
Interest expense |
$ 12,200 | ||||
|
Impairment loss–goodwill |
40,000 | ||||
|
Gain on disposal of equipment |
( 3,100 | ) | 49,100 | ||
|
Income before income tax |
13,825 | ||||
|
Income tax expense |
4,140 | ||||
|
Net income |
$ 9,685 | ||||
Additional information:
| 1. | Dividends on common shares in the amount of $ 4,600 were declared and paid during 2020. Dividends paid are treated as financing activities. | |
| 2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $ 73,500. | |
| 3. | Equipment with a cost of $ 36,000 that was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the direct method.
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