TEST II

HELLO CO. PRESENTED ITS FINANCIAL STATEMENTS TO YOU FOR THE YEARS 2018 -2019.

INCREASE
ASSETS 2019 2018 (DECREASE) ACTIVITY
CASH 356,000.00 350,000.00 6,000.00 operating
ACCOUNTS RECEIVABLE 1,356,000.00 1,480,000.00 (124,000.00) operating
INVENTORIES AT LCM 2,658,000.00 2,470,000.00 188,000.00 operating
PREPAID EXPENSES 42,000.00 34,000.00 8,000.00 operating
TAX PREPAYMENTS 70,000.00 58,000.00 12,000.00 operating
CURRENT ASSETS 4,482,000.00 4,392,000.00

FIXED ASSET AT COST 3,192,000.00 3,076,000.00 116,000.00 investing

LESS: ACC. DEPRECIATION (1,714,000.00) (1,582,000.00) 132,000.00 investing
NET FIXED ASSET 1,478,000.00 1,494,000.00 investing

INVESTMENT, LONG TERM 130,000.00 - (130,000.00) investing

OTHER ASSETS, LONG TERM 410,000.00 410,000.00 - investing
TOTAL ASSETS 6,500,000.00 6,296,000.00

LIABILITIES AND SHAREHOLDERS EQUITY

BANK LOANS AND NOTES PAYABLE 896,000.00 712,000.00 184,000.00 financing
ACCOUNTS PAYABLE 296,000.00 272,000.00 24,000.00 investing
TAXES PAYABLE 72,000.00 254,000.00 (182,000.00) investing
OTHER EXPENSE PAYABLES 382,000.00 328,000.00 54,000.00 investing
CURRENT LIABILITIES 1,646,000.00 1,566,000.00

LONG TERM DEBT 1,262,000.00 1,254,000.00 8,000.00 financing

SHAREHOLDERS EQUITY
COMMON STOCK 842,000.00 842,000.00 - financing
ADDITIONAL PAID IN CAPITAL 722,000.00 722,000.00 - financing
RETAINED EARNINGS 2,028,000.00 1,912,000.00 116,000.00 financing
TOTAL SHAREHOLDERS EQUITY 3,592,000.00 3,476,000.00 financing
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 6,500,000.00 6,296,000.00

NET SALES 7,984,000.00 7,442,000.00 operating

COST OF GOODS SOLD 5,360,000.00 5,000,000.00 operating
GROSS PROFIT 2,624,000.00 2,442,000.00 operating
SELLING , GEN. AND ADMIN. EXPENSES 1,824,000.00 1,682,000.00 operating
EARNINGS BEFORE INTEREST AND TAXES 800,000.00 760,000.00 operating
INTEREST EXPENSE 170,000.00 140,000.00 operating
EARNINGS BEFORE TAXES 630,000.00 620,000.00 operating
INCOME TAXES 228,000.00 224,000.00 operating
NET INCOME AFTER TAX 402,000.00 396,000.00 operating
CASH DIVIDENDS 286,000.00 260,000.00 financing
INCREASE IN RETAINED EARNINGS 116,000.00 136,000.00 operating
ADD. INFO: DEPRECIATION EXPENSE FOR 2019 P 224,000 WAS INCLUDED AS PART OF COGS

REQUIRED:
1. CLASSIFY THE INCREASE OR DECREASE IN THE ACCOUNTS AS TO ACTIVITY
2. BASED ON THE ABOVE MENTIONED DATA, PREPARE THE CASH FLOW FROM OPERATING ACTIVITIES USING
A. DIRECT METHOD

DIRECT METHOD

SCHED 1 CASH RECEIVED FROM CUSTOMERS

SALES 7,984,000.00
A/R BEG 1,480,000.00
 LESS: A/R END (1,356,000.00) 124,000.00
8,108,000.00

SCHED 2 CASH PAID TO SUPPLIERS

COST OF GOODS SOLD 5,360,000.00
DEPRECIATION EXPENSE (132,000.00)
5,228,000.00

INVENTORY END 2,658,000.00

INVENTORY BEG (2,470,000.00) 188,000.00
A/P BEG 272,000.00
A/P END (296,000.00) (24,000.00)
5,392,000.00

SCHED 3 CASH PAID FOR OPERATING EXPENSE

PREPAID EXPENSES END 42,000.00

PREPAID EXPENSES. BEG. (34,000.00) 8,000.00

SELLING , GEN . AND ADMIN EXPENSE 1,824,000.00

OTHER EXPENSE PAYABLES BEG. 328,000.00
OTHER EXPENSE PAYABLE , END (382,000.00) (54,000.00) 1,770,000.00
1,778,000.00 7,170,000.00
SCHED 4 CASH PAID FOR INCOME TAX
INCOME TAXES 228,000.00
TAX PRE-PAYMENT,BEG, (58,000.00)
TAX PREPAYMENTS , END 70,000.00 12,000.00
TAXES PAYABLE, BEG 254,000.00
TAXES PAYABLE, END (72,000.00) 182,000.00 194,000.00
422,000.00

SCHED 5 INTEREST EXPENSE 170,000.00

CASH FLOW FROM OPERATING ACTIVITIES

CASH RECEIVED FROM CUSTOMERS SCHED 1 8,108,000.00
CASH PAID TO SUPPLIERS SCHED 2 (5,392,000.00)
CASH PAID FOR OPERATING EXPENSES SCHED 3 (1,778,000.00)
CASH PAID FOR TAXES SCHED 4 (422,000.00)
CASH PAID FOR INTEREST SCHED 5 (170,000.00)
NET CASH PROVIDED (USED) FROM OPERATING ACTIVITIES 346,000.00

3. CASH FLOW FOR INVESTING ACTIVITY

GROSS ADDITIONS TO FIXED ASSETS (116,000.00)
PAYMENT FOR LONG TERM INVESTMENT (130,000.00)
NET CASH PROVIDED (USED) FROM INVESTING ACTIVITIES (246,000.00)

4. CASH FLOW FOR FINANCING ACTIVITY ACTIVITY

INCREASE IN SHORT TERM BORROWING(BANK LOANS & NOTES PAYABLE) 184,000.00
ADDITIONS TO LONG-TERM BORROWING 8,000.00
DIVIDENDS PAID (286,000.00)
NET CASH PROVIDED (USED) FROM INVESTING ACTIVITIES (94,000.00)

INCREASE (DECREASE IN CASH) 6,000.00

ADD: CASH, BEG (2018) 350,000.00
CASH END ( 2019) 356,000.00