Financial Information for Fesone Inc Additional Information:
1

question 30

Essay

Financial information for Fesone Inc.'s balance sheet for fiscal 2013 and 2014 follows:
$\begin{array}{lll} & \textbf { 2014} & \textbf { 2013} \\\\\text { Cash } & 32,300 & 350,000 \\\\\text { Accounts receivable } & 1,670,000 & 1,800,000 \\\\\text { Inventory } & 710,000 & 450,000 \\\\\text { Investments - held for trading } & 350,000 & 0 \\\\\text { Investments - held to maturity } & 150,000 & 0 \\\\\text { Property plant and equipment } & 4,000,000 & 4,000,000 \\\\\text { Accumulated depreciation } & (1,935,000) & (1,660,000) \\\\\text { Total } & \mathbf{4 , 9 7 7 3 0 0} & \mathbf{4 , 9 4 0 , 0 0 0}\end{array}$ $\begin{array}{lll}\text { Accounts payable } & 220,000 & 40,000 \\\\\text { Bank loan } & 2,601,000 & 3,000,000 \\\\\text { Bonds payable } & 595,300 & 590,000 \\\\\text { Preferred shares } & 0 & 20,000 \\\\\text { Common shares } & 473,000 & 350,000 \\\\\text { Retained earnings } & 1,088,000 & 940,000 \\\\\text { Total } & \mathbf{4 , 9 7 7, 3 0 0} & \mathbf{4 , 9 4 0 , 0 0 0}\end{array}$ Additional information:
1.Preferred shares were converted to common shares during the year at their book value.
2.The face value of the bonds is $600,000; they pay a coupon rate of 6% per annum.The effective interest rate of interest is 7% per annum.
3.Net income was $205,000.
4.There was an ordinary stock dividend valued at $13,000 and cash dividends were also paid.
5.Interest expense for the year was $115,000.Income tax expense was $61,500.
6.Fesone arranged for a $425,000 bank loan to finance the purchase of the held-to-maturity investments.
7.Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8.The held-for-trading investments are not cash equivalents.
9.Sales = 2,000,000; cost of goods sold = 300,000; and,sales and administration expenses = 1,043,500
Requirement:
Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.

---

Definitions:

Leg Buds

Early embryonic structures that eventually develop into the legs in various animals, including humans.

Cephalocaudal

A principle of physical growth that describes how growth starts at the head and upper body parts and then proceeds to the rest of the body.

Development

The process of change and growth in physical, cognitive, and social aspects over the lifespan.