Use the Following Financial Statements and Additional Information to (1)prepare

question 40

Essay

Use the following financial statements and additional information to (1)prepare a complete statement of cash flows for the year ended December 31,20X2.The cash provided or used by operating activities should be reported using the direct method,and (2)compute the company's cash flow on total assets ratio for 20X2.


Additional Information
a.A $20,000 note payable is retired at its carrying value in exchange for cash.
b.The only changes affecting retained earnings are net income and cash dividends paid.
c.New equipment is acquired for $120,000 cash.
d.Received cash for the sale of equipment that had cost $85,000,yielding a gain of $4,700.
e.Prepaid expenses relate to Other Expenses on the income statement.
f.All purchases and sales of merchandise inventory are on credit.

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Definitions:

Sales Commissions

A portion of the sale price paid to salespersons as a reward for their sales efforts, typically a percentage of the sales they generate.

Monthly Sales

The total revenue generated from the sale of goods or services by a company within a month.

Net Operating Income

The profit a company generates from its normal business operations, excluding extraordinary items and expenses like taxes and interest.

Break-even

The point at which total revenues equal total costs, resulting in no net profit or loss for a business.