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Presented below is the comparative balance sheet for Diatessaron Inc., a private company reporting under ASPE,...

Presented below is the comparative balance sheet for Diatessaron Inc., a private company reporting under ASPE, at December 31, 2021, and 2020:

DIATESSARON INC.

Balance Sheet

December 31

Assets 2021 2020

Cash $ 67,000 $ 98,000

Accounts receivable 101,000 75,000

Inventory 205,000 155,500

Long-term investment 101,500 0

Property, plant, and equipment 535,000 460,000

Accumulated depreciation (162,500) (140,000)

$847,000   $648,500

Liabilities and Shareholders' Equity

Accounts payable $ 57,500 $ 47,000

Dividends payable 6,000 0

Income tax payable 14,000 15,000

Long-term notes payable 25,000 0

Common shares 630,000 525,000

Retained earnings 114,500 61,500

$847,000  $648,500

----------------------------------------------------------------------------------------------------------------------------------------------------

DIATESSARON INC.

Income Statement

Year Ended December 31, 2021

Sales $663,000

Cost of goods sold 432,000

Gross profit 231,000

Operating expenses $147,500

Loss on sale of equipment 3,000 150,500

Profit from operations 80,500

Interest expense 3,000

Interest revenue (4,500) (1,500)

Profit before income tax 82,000

Income tax expense 14,000

Profit $ 68,000

Additional information:

  1. 1. Cash dividends of $15,000 were declared.
  2. 2. A long-term investment was acquired for cash at a cost of $101,500.
  3. 3. Depreciation expense is included in the operating expenses.
  4. 4. The company issued 10,500 common shares for cash on March 2, 2021. The fair value of the shares was $10 per share. The proceeds were used to purchase additional equipment.
  5. 5. Equipment that originally cost $30,000 was sold during the year for cash. The equipment had a carrying value of $9,000 at the time of sale.
  6. 6. The company issued a note payable for $28,000 and repaid $3,000 by year end.
  7. 7. All purchases of inventory are on credit.
  8. 8. Accounts payable is used only to record purchases of inventory.

Instructions

a. Can you show me a cash flow statement for the year using the indirect method.

b. Can you show me a cash flow statement for the year using the direct method.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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