Financial Information for Fesone Inc

question 29

Essay

Financial information for Fesone Inc.'s balance sheet for fiscal 2017 and 2018 follows:


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 $200,000;they pay a coupon rate of 6% per annum.The effective interest rate of interest is 8% per annum.
3.Net income was $290,000.
4.There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid.
5.Interest expense for the year was $130,000.Income tax expense was $116,000.
6.Fesone arranged for a $200,000 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.
Required:
a.Prepare a statement of cash flows for the year ended December 31,2018 using the indirect method.
b.Discuss how the transaction(s)above that are not reported on the statement of cash flows are reported in the financial statements.

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Definitions:

Pearson Correlation

A metric that quantifies the linear relationship between two variables, providing a value in the range of -1 to 1.

Negative Number

A number less than zero, typically represented with a minus sign in front, indicating a value opposite to its positive counterpart.

Null Hypothesis

A hypothesis that there is no significant difference or effect, typically used as a starting assumption in hypothesis testing.

Two-Tailed

Pertains to a test of significance where the critical area of a distribution is two-sided and tests whether a sample is either greater than or less than a certain range of values.