SIAL PROBLEM! KATE JONE Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 7 through Chapter 12 a's Cards. She ended the Kate is very pleased with the results of the first year of operations for Kate's Cards. She year on a high note, with the company's reputation for producing quality cards leading to mora a s to more busi- ness than she can currently manage. Kate is considering expanding and bringing in several ees. In order to do this, she will need to find a larger location and also purchase more equipment this means additional financing. Kate has asked you to look at her year-end financial statements you were a banker considering giving Kate a loan. Comment on your findings and provide calcula tions to support your comments. KATE'S CARDS Income Statement Year Ended August 31, 2019 $185,000 106,000 79,000 Sales revenue. Cost of goods sold Gross profit. Operating expenses Wages .. Consulting Insurance Utilities .... Rent Depreciation... Total operating expenses.. Income from operations. Interest expense. Income before income tax Income tax expense.. Net income 18,000 11,850 1,200 2,400 14,400 3,250 51,100 27,900 900 27,000 5,400 $ 21,600 TES CARDS Balance Sheet August 31, 2019 C assets receivable insurance assets $17.400 11,000 16,000 1.000 45,400 17.500 3.250 $59,650 ated depreciation Dates A payable Une med revenue... Omer current abilities Total current liabilities Note payable... Total abilities... Stockholders' equity Common stock Additional paid-in-capital. Preferred stock..... Retained earnings Total stockholders' equity.... Total liabilities and stockholders' equity .. $ 6,200 1.250 1,900 9,350 15,000 24,350 500 9,500 5.000 20,300 35,300 $59,650 $21,600 3,250 (11,000) (16,000) (1,000) 6.200 1.250 1,900 6,200 KATE'S CARDS Statement of Cash Flows Year Ended August 31, 2019 Cash flow from operating activities Net income... Add depreciation ....... Increase in accounts receivable Increase in inventory.......... . Increase in prepaid expenses......... Increase in accounts payable.. Increase in unearned revenue... Increase in other current liabilities... Cash provided by operating activities. ... Cash flow from investing activities Purchase of equipment...... Cash used by investing activities ... Cash flow from financing activities Proceeds from bank note. Issuance of common stock. Issuance of preferred stock.. . Cash dividends .... cash provided by financing activities crease in cash. .................................. Cash at beginning of year. ... Cash at end of year ....... (17,500) (17.500) 15,000 10,000 5,000 (1.300) 28,700 17,400 . . .. $17,400 dued cash ande n stock and the preferred are are 50 preferred sham