Question

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Question 3: (19 points)

Quality Kitchen Company’s 2021 single-step income statement and comparative balance sheet are provided below:

QUALITY KITCHEN COMPANY

Income Statement

Year Ended December 31, 2021

Revenue................................................................................................................... $ 920,000

Expenses

       Cost of goods sold......................................................................... $ 493,500

       Salaries............................................................................................... 189,000

       Other operating expense ................................................................... 73,500

       Depreciation expense........................................................................ 25,000

       Interest.................................................................................................. 13,000

       Income taxes....................................................................................... 18,000    812,000

Profit.......................................................................................................................... $ 108,000

QUALITY KITCHEN COMPANY

Balance Sheet

December 31

                                                                                                                           2021          2020

Assets

Cash.......................................................................................................... $ 14,000   $ 10,000

Accounts receivable................................................................................... 29,000       24,000

Inventory...................................................................................................... 13,500       17,000

Prepaid expenses......................................................................................... 2,000         2,000

Land............................................................................................................ 250,000    250,000

Building and equipment – cost............................................................... 497,000    422,000

Accumulated depreciation.................................................................... (150,000)  (125,000)

       Total assets..................................................................................... $ 655,500$ 600,000

Liabilities and Shareholders' Equity

Accounts payable.................................................................................... $ 25,900   $ 22,400

Taxes payable............................................................................................... 1,000         3,000

Interest payable............................................................................................. 1,500         2,500

Salaries payable............................................................................................ 8,000         5,000

Long-term debt......................................................................................... 234,000    260,000

Common shares....................................................................................... 120,000    100,000

Retained earnings.................................................................................... 265,100    207,100

       Total liabilities and shareholders' equity.................................... $ 655,500$ 600,000

Additional information:

1.    No new long-term debt was taken during the year.

2.    New equipment was purchased, and none was sold.

3.    Common shares were issued for cash.

4.    Cash dividends were paid to common shareholders.

5.    All operating expenses were paid in the period incurred.

Required: Prepare the cash flow statement for 2021, using the direct method.

Answer 1

Answer-

QUALITY KITCHEN COMPANY
STATEMENT OF CASH FLOWS (USING DIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,YEAR 2021
Particulars		Amount
Cash Flow from Operating activities
Cash received from customers	($920000+$24000-$29000)	915000
Cash paid to suppliers	($493500+$13500-$17000+$22400-$25900)	-486500
Cash paid for salaries	($189000+$5000-$8000)	-186000
Cash paid for income taxes	($18000+$3000-$1000)	-20000
Cash paid for interest	($13000+$2500-$1500)	-14000
Cash paid for other operating expenses		-73500
Net cash Flow from Operating activities		135000
Cash Flow from Investing activities
New equipment purchased		-75000
Net cash Flow from Investing activities (b)		-75000
Cash Flow from Financing activities
Cash dividends paid	($207100+$108000-$265100)	-50000
Common stock issued		20000
Long-term debt paid		-26000
Net cash Flow from Financing activities (c)		-56000
Net Change in cash c=a+b+c		4000
Beginning cash balance		10000
Closing cash balance		14000