Question

Culver Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

CULVER INC.
Comparative Statement of Financial Position
December 31
2020      2019
Cash     $47,775         $25,090     
Accounts receivable   57,930         51,030     
Inventory      39,990         60,070     
Prepaid rent      5,210         4,100     
Equipment      161,990         130,120     
Accumulated depreciation–equipment      (35,210   )      (25,100   )
Goodwill      28,000         68,000     
    Total assets      $305,685         $313,310     
                        
Accounts payable      $46,190         $40,120     
Income tax payable      3,990         6,070     
Salaries and wages payable      8,090         4,090     
Short–term loans payable      7,930         10,030     
Long–term loans payable      68,000         87,000     
Common shares      130,000         130,000     
Retained earnings      41,485         36,000     
    Total liabilities and shareholders’ equity      $305,685         313,310     

CULVER INC.
Income Statement
Year Ending December 31, 2020
Sales revenue               $348,490
Cost of goods sold               165,000
Gross margin               183,490
Operating expenses               120,000
Operating income               63,490
Interest expense      $12,100           
Impairment loss–goodwill      40,000           
Gain on disposal of equipment      (2,400   )      49,700
Income before income tax               13,790
Income tax expense               4,105
Net income               $9,685

Additional information:

1.      Dividends on common shares in the amount of $4,200 were declared and paid during 2020.
2.      Depreciation expense is included in operating expenses, as is salaries and wages expense of $70,000.
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. (Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).)

Answer 1