Reference no: EM133081360
Question - Flounder's Custom Clothing (FCC) sells branded clothing to resorts and corporations. The company's comparative financial statements are presented below.
FLOUNDER'S CUSTOM CLOTHING STATEMENT OF FINANCIAL POSITION December 31
|
Current Assets
|
2020
|
2019
|
Cash
|
150,000
|
78,500
|
Accounts receivable
|
29,000
|
25,000
|
Inventory
|
70,000
|
44,800
|
Prepaid expenses
|
10,400
|
2,900
|
Total current assets
|
259,400
|
151,200
|
Property and equipment
|
|
|
Property and equipment
|
99,000
|
143,000
|
Less: Accumulated depreciation
|
54,800
|
76,000
|
Net property and equipment
|
44,200
|
67,000
|
TOTAL ASSETS
|
$303,600
|
$218,200
|
Current liabilities
|
|
|
Accounts payable
|
25,700
|
30,400
|
Salaries payable
|
9,400
|
5,000
|
Interest payable
|
4,800
|
8,400
|
Total current liabilities
|
39,900
|
43,800
|
Loan payable
|
113,000
|
85,000
|
Total liabilities
|
152,900
|
128,800
|
Shareholders' equity
|
|
|
Common shares
|
21,000
|
1,600
|
Retained earnings
|
129,700
|
87,800
|
Total shareholders' equity
|
150,700
|
89,400
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$303,600
|
$218,200
|
FLOUNDER'S CUSTOM CLOTHING INCOME STATEMENT For the Years Ended December 31
|
|
2020
|
2019
|
Sales revenue
|
905,000
|
727,000
|
Cost of sales
|
667,000
|
542,000
|
Gross margin
|
238,000
|
185,000
|
Expenses
|
|
|
Salary expense
|
120,000
|
106,000
|
Interest expense
|
5,200
|
1,900
|
Other expenses
|
8,000
|
6,300
|
Depreciation expense
|
10,000
|
12,200
|
Total expenses
|
143,200
|
126,400
|
Operating income
|
94,800
|
58,600
|
Loss disposal of equipment
|
7,800
|
900
|
Income tax expense
|
23,700
|
18,300
|
Net income
|
63,300
|
39,400
|
Following is additional information concerning FCC's transactions during the year ended December 31, 2020:
Equipment costing $34,000 was purchased by paying $24,000 cash and issuing 400 common shares.
Equipment costing $78,000 that was purchased at the beginning of 2019 was sold at the end of 2020 for $39,000. Straight-line depreciation had been used with an expected asset life of 5 years and a residual value of $0.
The "other expenses" relate to prepaid items.
In order to supplement its cash, FCC increased its bank loan by $28,000.
Cash dividends of $21,400 were paid at the end of the fiscal year.
Cost of sales includes $183,000 of direct labour costs.
Required - Prepare a statement of cash flows for FCC for the year ended December 31, 2020, using the indirect method. FCC follows ASPE.