Reference no: EM132470011
Problem - Natalie has prepared the balance sheet and income statement of Cookie and Coffee Creations Inc. and would like you to prepare the cash flow statement. The comparative balance sheet of Cookie and Coffee Creations Inc. at October 31, 2020 for the years 2020 and 2019 and the income statement for the year ended October 31, 2020, are presented below.
1. Equipment (cost 4,500 and book value 3,000) was disposed of at the beginning of the year for 500 cash and replaced with new equipment purchased for 4,000 cash.
2. Additional equipment was bought for 14,000 on November 1, 2019. A 12,000 note payable was signed. The terms provide for equal semi-annual installment payments of 2,000 on May 1 and November 1 of each year, plus interest of 5% on the outstanding principal balance.
3. Other equipment was bought for 13,000 cash
4. Dividends were declared on the preferred and common stock on October 15, 2020, to be paid on November 15, 2018.
5. Accounts payable relate only to merchandise creditors.
6. Prepaid expenses relate only to other operating expenses.
Required -
a. Prepare a statement of cash flows for Cookie and Coffee Creations Inc. for the year ended October 31, 2020, using the indirect method.
b. Prepare a statement of cash flows for Cookie and Coffee Creations Inc. for the year ended October 31, 2020, using the direct method.