Question

The following information and financial statements excerpts pertain to Liquidity, Inc.

All short term investments (securities available for sale) were purchased on 12/31/18 and sold during 2019.

The company entered a lease agreement on 12/31/19.

Fixed assets with a net book value of $15 were sold during the year.

The company repaid the current portion of long-term debt during the year.

Dividend was declared and partially paid.

	2018				2019
Assets
Cash		54				45
Short term investments		95				0
Accounts receivable		45				85
Inventory		52				75
Prepaid general expenses		11				15
Fixed assets under capital lease, net		0				50
Fixed assets, net		165				228
		422				498
Liabilities and stockowners’ equity
Accounts payable		38				48
Wages payable		12				6
Tax payable		3				5
Dividend payable		0				4
Current portion of long term debt		10				12
Obligations under capital leases		0				50
Long term debt		183				180
Common stock		150				163
Retained earnings		26				30
		422				498

	2018				2019
Revenues, net						426
Cost of goods sold						310
Gross margin						116
General expenses		30
Wages expenses		42
Depreciation expense		24
Interest expense		11
Loss on sale of fixed assets		3
Gain on sale of securities available for sale		(12	)
Tax expenses		8				106
Net income						10

Required:

Prepare the statement of cash flows for the year 2019 using the direct method.

Reconcile net income and net cash flows from operating activities for the year 2019.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.