Question

INSTRUCTIONS: Using the financial information below, prepare a proper cash flow statement, including any necessary disclosures.
COMPARATIVE BALANCE SHEET
	Year 2		Year 1
Cash	133,000		195,000
Accounts Receivable	372,000		110,000
Allowance for Doubtful Accounts	(20,000)		(10,000)
Inventory	395,000		155,000
Reserve for Obsolete Inventory	(5,000)		(5,000)
Prepaid Expenses	15,000		-
Equipment, net	155,000		165,000
Total Assets	1,045,000		610,000
Accounts Payable	81,000		100,000
Corporate Income Taxes Payable	78,000		29,000
Accrued Expenses	105,000		5,000
Notes Payable	234,000		300,000
Common Stock, no par	160,000		100,000
Retained Earnings	387,000		76,000
	1,045,000		610,000
INCOME STATEMENT
Sales, net	1,925,000
Cost of Goods Sold	660,000
Gross Profit	1,265,000
Operating Expenses	785,000
EBITDA	480,000
Depreciation Expense	35,000
EBIT	445,000
Interest Expense	22,000
EBT	423,000
Income Tax Expense	77,000
Net Income	346,000
STATEMENT OF RETAINED EARNINGS
Beginning Retained Earnings	76,000
Add: Net Income	346,000
Less: Dividends	(35,000)
Ending Retained Earnings	387,000
ADDITIONAL INFORMATION
There was no interest to accrue in either years 1 or 2
Several income tax payments were made throughout year 2, totalling $56,000
A vehicle was purchased in December year 2 for $25,000
Common stock was issued to admit a new shareholder
Prepaid expenses consisted of insurance payments paid up front
There was no new debt contracts entered into during year 2

Answer 1