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Assignment 3: P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow:...

Assignment 3:

P13-12A The income statement and unclassified statement of financial position for E-Perform, Inc. follow:

E-PERFORM, INC.

Statement of Financial Position

December 31

  2018  

  2017  

Assets

Cash

$   97,800

$  48,400

Held for trading investments

 128,000

 114,000

Accounts receivable

  75,800

  43,000

Inventory

 122,500

  92,850

Prepaid expenses

  18,400

  26,000

Equipment

 270,000

 242,500

Accumulated depreciation

 (50,000)

 (52,000)

Total assets

$662,500

$514,750

Liabilities and Shareholders' Equity

Accounts payable

$ 93,000

$ 77,300

Accrued liabilities

  11,500

   7,000

Bank loan payable

 110,000

 150,000

Common shares

 200,000

 175,000

Retained earnings

 248,000

 105,450

 Total liabilities and shareholders' equity

$662,500

$514,750

E-PERFORM, INC.

Income Statement

Year Ended December 31, 2018

Sales

$492,780

Cost of goods sold

  185,460

Gross profit

307,320

Operating expenses

  116,410

Income from operations

190,910

Other revenues and expenses

  Unrealized gain on held for trading investments

$14,000

  Interest expense

  (4,730)

    9,270

Income before income tax

200,180

Income tax expense

45,000

Net income

$155,180

Additional information:

  1. Prepaid expenses and accrued liabilities relate to operating expenses.
  2. An unrealized gain on held for trading investments of $14,000 was recorded.
  3. New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 long-term bank loan payable.
  4. Old equipment having an original cost of $57,500 was sold for $1,500.
  5. Accounts payable relate to merchandise creditors.
  6. Some of the bank loan was repaid during the year.
  7. A dividend was paid during the year.
  8. Operating expenses include $46,500 of depreciation expense and a $7,500 loss on disposal of equipment.

Instructions

(a) Prepare the statement of cash flows, using the direct method.

(b) E-Perform's cash position more than doubled between 2017 and 2018. Identify the primary reason(s) for this significant increase.

Solutions

Expert Solution


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