Sailor Company's income statement for the current year and comparative balance sheets at December 31 of this year and the last year are shown below. Sailor Company Income Statement for the current year Sales $750,000 Cost of goods sold (440,000) $310,000 Wages and other operating expenses 130,000 Depreciation expenses 38,000 Patent amortization expense 8,000 Interest expense 12,000 Income tax expense 44,000 Loss on sale of equipment 5000 (237,000) Other income: Gain on sale of equipment 10000 Dividend income 15000 25000 NET INCOME $98,000 Dec 31, This year Dec 31, Last Year 190,000 100,000 445,000 350,000 (91,000) (75,000) 179,000 225,000 (41,000) (46,000) 54,000 32,000 30,000 80,000 766,000 666,000 21,000 24,000 40,000 31,000 97,000 77,000 10,000 7,000 168,000 139,000 934,000 805,000 Sailor Company Balance sheets Non-Current Assets Land Buildings Accumulated depreciation-Buildings. Equipment Accumulated Depreciation -- Equipment Patents Long term Investments Current assets Cash and cash equivalents Accounts receivable Inventory Prepaid expenses TOTAL ASSETS Non-current liabilities. Deferred tax Bonds payable 4,500 125,000 129,500 Current liabilities Accounts payable 16,000 Interest payable 5,000 Income tax payable 5,500 36,000 26,500 Share capital and reserves Preferred Stock ($100 par value) 100,000 70,000 Common stock ($5 par value) 410,000 400,000 130,000 124,000 Paid-in capital in excess of par value -- Common Retained earnings 105,000 55,000 745,000 649,000 TOTAL LIABILITIES AND EQUITY 934,000 805,000 During the year, the following transactions occurred: 1. Purchased land for cash. 2. Sold long term investments costing $50,000 for $60,000 cash. 3. Capitalized an expenditure of $95,000 made to improve the building. 4. Sold equipment for $14,000 cash that originally cost $46,000 and had $27,000 accumulated depreciation. 5. Issued bonds payable at face value for cash. 6. Acquired a patent with a fair value of $30,000 by issuing 300 shares of preferred stock at par value. 7. Declared and paid a $48,000 cash dividend. 8. Issued 2,000 shares of common stock for cash at $8 per share. 9. Recorded depreciation of $16,000 on buildings and $22,000 on equipment. REQUIRED: a. Prepare a statement of cash flows for this year, using the indirect method to calculate cash. flows from operations. Include all workings and follow correct format. b. Interpret the cash flow situation of Sailor Company, and comment on the future implications of its operations. 11545-20 markel 3,000 150,000 153,000 25,000 6,000 5,000 Sailor Company's income statement for the current year and comparative balance sheets at December 31 of this year and the last year are shown below. Sailor Company Income Statement for the current year Sales $750,000 Cost of goods sold (440,000) $310,000 Wages and other operating expenses 130,000 Depreciation expenses 38,000 Patent amortization expense 8,000 Interest expense 12,000 Income tax expense 44,000 Loss on sale of equipment 5000 (237,000) Other income: Gain on sale of equipment 10000 Dividend income 15000 25000 NET INCOME $98,000 Dec 31, This year Dec 31, Last Year 190,000 100,000 445,000 350,000 (91,000) (75,000) 179,000 225,000 (41,000) (46,000) 54,000 32,000 30,000 80,000 766,000 666,000 21,000 24,000 40,000 31,000 97,000 77,000 10,000 7,000 168,000 139,000 934,000 805,000 Sailor Company Balance sheets Non-Current Assets Land Buildings Accumulated depreciation-Buildings. Equipment Accumulated Depreciation -- Equipment Patents Long term Investments Current assets Cash and cash equivalents Accounts receivable Inventory Prepaid expenses TOTAL ASSETS Non-current liabilities. Deferred tax Bonds payable 4,500 125,000 129,500 Current liabilities Accounts payable 16,000 Interest payable 5,000 Income tax payable 5,500 36,000 26,500 Share capital and reserves Preferred Stock ($100 par value) 100,000 70,000 Common stock ($5 par value) 410,000 400,000 130,000 124,000 Paid-in capital in excess of par value -- Common Retained earnings 105,000 55,000 745,000 649,000 TOTAL LIABILITIES AND EQUITY 934,000 805,000 During the year, the following transactions occurred: 1. Purchased land for cash. 2. Sold long term investments costing $50,000 for $60,000 cash. 3. Capitalized an expenditure of $95,000 made to improve the building. 4. Sold equipment for $14,000 cash that originally cost $46,000 and had $27,000 accumulated depreciation. 5. Issued bonds payable at face value for cash. 6. Acquired a patent with a fair value of $30,000 by issuing 300 shares of preferred stock at par value. 7. Declared and paid a $48,000 cash dividend. 8. Issued 2,000 shares of common stock for cash at $8 per share. 9. Recorded depreciation of $16,000 on buildings and $22,000 on equipment. REQUIRED: a. Prepare a statement of cash flows for this year, using the indirect method to calculate cash. flows from operations. Include all workings and follow correct format. b. Interpret the cash flow situation of Sailor Company, and comment on the future implications of its operations. 11545-20 markel 3,000 150,000 153,000 25,000 6,000 5,000