Question

Income Statement
	2016	2017	2018
Net sales	1,304,000	1,507,000	1,791,000
Cost of sales	781,000	952,000	1,210,000
Gross profit	523,000	555,000	581,000
Marketing	135,400	149,670	220,245
General administration	151,000	151,200	219,560
Depreciation	35,695	49,805	60,345
EBIT	200,905	204,325	80,850
Interest	45,000	57,000	70,000
EBT	155,905	147,325	10,850
Income tax	48,331	45,671	3,364
Net income	107,574	101,654	7,487
Balance Sheet
	2016	2017	2018
Cash	55,000	43,500	11,000
Accounts receivable	220,000	261,000	376,337
Inventories	388,124	437,139	545,000
Prepaid insurance	25,000	28,000	28,500
Total current assets	688,124	769,639	960,837
Fixed assets, net	356,950	498,050	603,450
Total assets	1,045,074	1,267,689	1,564,287
Accounts payable	127,500	196,500	301,523
Other payables	51,000	69,860	79,499
Line of credit	61,500	51,300	130,200
Current portion of long-term debt	32,500	42,800	57,850
Total current liabilities	272,500	360,460	569,072
Long-term debt	325,000	428,000	578,500
Shareholders' equity
Common shares	360,000	360,000	360,000
Retained earnings	87,574	119,229	56,715
Total liabilities and equities	1,045,074	1,267,689	1,564,287

Create a Statement of Cash Flows for 2017 and 2018.

Answer 1

Statement of cash flows

For the year ending December 31, 2017

I. Cash flows from operating activities
Net income	101,654
Add: Income tax expense	45,671
Depreciation	49,805
Interest	57,000
Operating profit before working capital changes	254,130
Less: Increase in current assets:
Accounts receivable	-41,000
Inventories	-49,015
Prepaid expenses	-3,000
Less: Decrease in current liabilities
Line of credit	-10,200
Add: Increase in current liabilities:
Accounts payables	69,000
Other payables	18,860
Current maturity of long term debt	10,300
Less: income tax expense	-45,671
Net cash flows from operating activities		203,404
II. Cash flows from investing activities
Purchase of fixed assets	-190,905
Net cash used in investing activities		-190,905
III. Cash flows from Financing activities
Issue of long term debt	103,000
Dividend paid	-69,999
Interest paid	-57,000
Net cash used in financing activities		-23,999
Net increase in cash (I + II + III)		-11,500
Add: Begining cash balance		55,000
Ending cash balance		43,500

Statement of cash flows

For the year ending December 31, 2018

I. Cash flows from operating activities
Net income	7,487
Add: Income tax expense	3,364
Depreciation	60,345
Interest	70,000
Operating profit before working capital changes	141,196
Less: Increase in current assets:
Accounts receivable	-115,337
Inventories	-107,861
Prepaid insurance	-500
Add: Increase in current liabilities:
Accounts payables	105,023
Line of credit	78,900
Other payables	9,639
Current maturity of long term debt	15,050
Less: Income tax expense	-3,364
Net cash flows from operating activities		122,746
II. Cash flows from investing activities
Purchase of fixed assets	-165,745
Net cash used in investing activities		-165,745
III. Cash flows from Financing activities
Issue of long term debt	150,500
Dividend paid	-70,001
Interest paid	-70,000
Net cash flows from financing activities		10,499
Net increase in cash (I + II + III)		-32,500
Add: Begining cash balance		43,500
Ending cash balance		11,000

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