Question 2

A comparative statement of financial position for Carmichael Industries Inc. follows:

Carmichael Industries Inc.

Statement of Financial Position

December 31, 2021

	2021	2020
Assets
Cash	21,000	34,000
Accounts receivable	104,000	54,000
Inventory	220,000	189,000
Land	71,000	110,000
Equipment	260,000	200,000
Accumulated depreciation - equipment	(69,000)	(42,000)
Total	607,000	545,000
Liabilities and Shareholders Equity
Accounts payable	52,000	59,000
Bonds payable	150,000	200,000
Common shares	214,000	164,000
Retained Earnings	191,000	122,000
Total	607,000	545,000

Carmichael Industries Inc.

Income Statement

For the Year Ended December 31, 2021

Net sales.................................................................................................. 620,000

Cost of goods sold . 186,000

Gross Profit ... 434.000

Operating expenses................................................................................. 205,000

Income from operations.......................................................................... 229,000

Other revenues and expenses

Gain on sale of land......................................................................... 5,000

Interest expense............................................................................... 8,000 (3,000)

Income before income taxes................................................................... 226,000

Income taxes........................................................................................... 97,000

Net income.............................................................................................. 129,000

Additional information:

1. Net income for the fiscal year ending December 31, 2017 was $129,000.
2. Cash dividends of $60,000 were declared and paid. Dividends paid are treated as financing activities.
3. Bonds payable amounting to $50,000 were retired through issuance of common shares.
4. Land was sold at a gain of $5,000.
5. No equipment was sold during the year.

Required:

Prepare a statement of cash flows using the direct method.