Riyadh Star, Balance Sheet Statement December 31, 2018 & December 31, 2019

	2018		2019
Cash	$         104,000		$       123,250
Accounts Receivable	183,350		100,000
Inventory	250,000		210,000
Prepaid Expenses	80,000		120,000
Equipment (Net)	584,650		800,000
Total Assets	$      1,202,000		$    1,353,250
Accounts Payable	$         220,000		$       180,000
Salary Payable	94,000		56,250
Interest Payable	20,000		37,000
Bonds Payable	320,000		300,000
Common Shares	370,000		580,000
Retained Earnings	178,000		200,000
Total Equity and Liabilities	$      1,202,000		$    1,353,250

Riyadh Star, Income Statement for the Year Ended Dec 31, 2019
Sales	$      1,255,250
Cost of Goods Sold	822,000
Gross Profit			433,250
Salaries Expenses	203,945
Interest Expenses	75,000
Depreciation Expenses	60,000
Tax Expenses	42,305
Total Expenses			381,250
Net Income			$        52,000

In addition:

(1) Equipment costing $215,350 was purchased and the company paid for it by issuing 10,735 shares at $10 each, and the remainder was paid in cash.

(2) The Star declared and paid cash dividends at the end of 2019.

Requirements:

(1) Prepare cash flow statement for the period ended on Dec 31, 2019 using direct method

(2) Prepare cash flow statement for the period ended on Dec 31, 2019 using indirect method

(3) Determine the balance of free cash flows on Dec 31, 2019 under both methods and comment on it.

Answer rating: 100% (QA)

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