The Diamond Factory, Inc. has just ended the 2021 production year. The balance sheet and income statement are presented below. Two of the four key financial statements remain to be prepared for the stockholders’ report.

Balance Sheet

Diamond Factory, Inc.

December 31, 2021 and 2020

2021 2020

Assets

Cash $ 2,000 $ 1,500

Accounts receivable 7,500 5,000

Inventory 7,000 6,000

Gross fixed assets $22,000 $19,000

Accumulated depreciation 11,000 10,000

Net fixed assets $11,000 $ 9,000

Total assets $27,500 $21,500

Liabilities and Stockholders’ Equity

Accounts payable $ 3,000 $ 2,000

Notes payable 3,500 3,000

Accruals 1,500 1,500

Long-term debt 13,000 9,500

Common stock at par 500 500

Paid-in capital in excess of par 4,000 4,000

Retained earnings 2,000 1,000

Total liabilities and stockholders’ equity $27,500 $21,500

Income Statement

Diamond Factory, Inc.

for the Year Ended December 31, 2021

Sales $40,000

Cost of goods sold 21,000

Gross profits $19,000

Operating expenses 12,500

Operating profits $ 6,500

Interest expense 2,000

Net profits before taxes $ 4,500

Taxes (40%) 1,800

Net Income after taxes $ 2,700

Required:

a. Calculate the amount of cash dividends paid during 2021.

b. Calculate the depreciation expense incurred during 2021.

c. Prepare a statement of retained earnings for the year ended December 31, 2021.

d. Prepare the statement of cash flows for the year ended December 31, 2021.

Answer rating: 100% (QA)

a To calculate the amount of cash dividends paid during 2021 we need to look at the change in the retained earnings from the balance sheet The change ... View the full answer