Part 1

Complete the statement of cash flows using the information provided in the ABC Company's Income statement and comparative balance sheets template. Use Excel formulas within the cells to calculate all required calculated numbers.

Part 2

1. Explain the purpose of the statement of cash flows.
2. How the statement of cash flow is prepared, using examples from part 1 of this assignment.
3. Discuss important information that can be obtained from the statement of cash flows.

BC Company's Income statement and comparative balance sheets for 2019 and 2020 are as follows: ABC Company Balance Sheets Change Effect on Dec 31 2020 Dec 31 2019 in 2020 Cash Assets Cash 13,000 17,000 Accounts receivable 27,000 33,000 Inventory 99,000 71,000 Prepaid advertising 17,000 14,000 Long-term investments -- available for sale 35,000 46,000 Fair value adjustments to investments (6,000) PPE 183,000 135,000 Accumulated depreciation (77,000) (66,000) Total assets 297,000 244,000 Liabilities and Equity Accounts payable 32,000 19,000 Wages payable 11,000 7,500 Income tax payable 8,000 9,500 Common stock 144,000 130,000 Retained earnings 102,000 84,000 Unrealized loss on investments - (6,000) Total liabilities and equity 297,000 244,000 ABC Company Income Statement For the period ended December 31, 2020 Sales 390,000 Dividend income 10,000 400,000 Cost of goods sold 238,000 Wages expense 87,000 Advertising expense 15,000 Depreciation expense 16,000 Income tax expense 22,000 Loss on sale of investments 7,000 Net income 15,000 Other Information: The company declared and paid $23,000 in cash dividends during 2020 PPE was purchased for cash in 2020. Additional common stock was issued for cash. Investments costing $11,000 and carried at $10,000 were sold for cash at a $2,000 realized loss in 2020. Requirements: 1. Identify the change in account balances for 2020 and the effect that change will have on Cash. 2. Compute ABC's operating cash flow for 2020 using the indirect method. 3. Compute ABC's operating cash flow for 2020 using the direct method. ABC Company Statement of Cash Flow Indirect Method Dec 31 2020 Net income Depreciation expense Loss on sale of investments Accounts receivable Inventory Prepaid advertising Accounts payable Wages payable Income tax payable Cash from operating activities ABC Company Statement of Cash Flow Direct Method Dec 31 2020 Cash received from customers Cash received as dividends Cash paid for merchandise purchases Cash paid to employees Cash paid for advertising Cash paid for income taxes Net cash provided by operating activities