Zazzy Company reported the following information for the year 2018: Zazzy Company Income Statement For the Period Ended December 31, 2018 Sales $636,000 Cost of Goods Sold 240,000 Gross Profit 396,000 Office Expenses 242,000 Depreciation Expense 9,000 Income from Operations 145,000 Interest Expense 0 Income before Income Tax 145,000 Income tax expense 120,000 Net Income $25,000 Zazzy Company Comparative Balance Sheets December 31, 20XX 2018 2017 Assets: Cash and cash equivalents $84,000 $48,700 Accounts Receivable 53,600 50,000 Inventory 39,600 39,000 Prepaid Expenses 5,500 15,000 Equipment 206,000 200,000 Accumulated Depreciation - Equipment (126,700) (117,700) Total assets $262,000 $235,000 Liabilities: Accounts Payable $48,000 $49,000 Accrued Liabilities 44,000 42,000 Stockholders' Equity: Common Stock 10,000 9,000 Retained Earnings 160,000 135,000 Total Liabilities & S/H Equity $262,000 $235,000 Additional information: 1. No equipment was sold throughout the year, so the change in accumulated depreciation is a result of depreciation expense for the year. 2. Stock was issued for cash. 3. Equipment was purchased with cash.

Required:

1. Prepare a FULL statement of cash flows for the year 2018, including the Operating, Investing and Financing sections, assuming that Zazzy Company uses the INDIRECT method.

2. Can a company have a positive cash flow and negative income? What about positive income and negative cash flow? Explain your answer.

Answer rating: 100% (QA)

1 STATEMENT OF CASH FLOWS Cash flows from operating activities Net income 25000 Add deduct items to ... View the full answer