Consider the following transactions pertaining to Retail Traders Company. Amounts in parentheses indicate a decrease in the account.

Required:
1. Based on this information, prepare an income statement and statement of cash flows.
2. Provide an intuitive explanation of how the adjustments made to net income in the cash flow statement convert the accrual numbers to cash flownumbers.

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Assets LiabilitiesOwners' Equity Accounts Common Stock Retained Explanation Cash Inventory Payable Earnings $3,000 2,000 115,000 10,000 100,000 5,000 100,000 Beginning balance Credit purchases Cash sales Cost of goods sold Cash paid to suppliers(85,000) Ending balance S115,000 (90,000) (90,000) (85,000) 20,000 oo 30,000 20,000 3,000 $27,000