Question

Instant Brake Inc.’s comparative balance sheet information at December 31, 2020 and 2019, and its income statement for the year ended December 31, 2020, are as follows:

Instant Brake Inc.
Income Statement
December 31, 2020
Sales				$	879,000
Cost of goods sold					571,000
Gross profit				$	308,000
Operating expenses	$	132,670
Depreciation expense		41,230			173,900
Operating Profit					134,100
Loss on sale of equipment		12,110
Investment income		19,020
Profit before taxes					141,010
Income taxes					17,000
Profit				$	124,010

Instant Brake Inc.
Balance Sheet Information
	December 31
	2020			2019			Net Change
Cash	$	43,000		$	23,960		$	19,040
Cash equivalents		24,780			8,600			16,180
Accounts receivable		87,320			32,440			54,880
Inventory		113,240			78,520			34,720
Investment		0			24,780			24,780	)
Land		75,800			75,800			0
Building and equipment		420,530			439,550			(19,020	)
Accumulated depreciation		113,050			91,960			21,090
Accounts payable		11,900			36,800			(24,900	)
Dividends payable		1,800			1,100			700
Bonds payable		19,000			0			19,000
Preferred shares		80,600			80,600			0
Common shares		405,080			405,080			0
Retained earnings		133,240			68,110			65,130

During 2020, the following transactions occurred:

1. Purchased equipment for $20,700 cash.
2. Sold the investment on January 1, 2020, for $43,800, resulting in investment income of $19,020.
3. Sold equipment for $7,470 cash that had originally cost $39,720 and had $20,140 of accumulated depreciation.
4. Issued $19,000 of bonds payable at face value.

Required:
1. How much cash was paid in dividends?

2. Prepare a statement of cash flows for Instant Brake for the year ended December 31, 2020, using the indirect method. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1