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| Riyadh Star, Balance Sheet Statement December 31, 2018 & December 31, 2019 | | | |
| | 2018 | | 2019 |
| Cash | $ 104,000 | | $ 123,250 |
| Accounts Receivable | 183,350 | | 100,000 |
| Inventory | 250,000 | | 210,000 |
| Prepaid Expenses | 80,000 | | 120,000 |
| Equipment (Net) | 584,650 | | 800,000 |
| Total Assets | $ 1,202,000 | | $ 1,353,250 |
| | | | |
| Accounts Payable | $ 220,000 | | $ 180,000 |
| Salary Payable | 94,000 | | 56,250 |
| Interest Payable | 20,000 | | 37,000 |
| Bonds Payable | 320,000 | | 300,000 |
| Common Shares | 370,000 | | 580,000 |
| Retained Earnings | 178,000 | | 200,000 |
| Total Equity and Liabilities | $ 1,202,000 | | $ 1,353,250 |
| Riyadh Star, Income Statement for the Year Ended Dec 31, 2019 | | | |
| Sales | $ 1,255,250 | | |
| Cost of Goods Sold | 822,000 | | |
| Gross Profit | | | 433,250 |
| Salaries Expenses | 203,945 | | |
| Interest Expenses | 75,000 | | |
| Depreciation Expenses | 60,000 | | |
| Tax Expenses | 42,305 | | |
| Total Expenses | | | 381,250 |
| Net Income | | | $ 52,000 |
In addition:
(1) Equipment costing $215,350 was purchased and the company paid for it by issuing 10,735 shares at $10 each, and the remainder was paid in cash.
(2) The Star declared and paid cash dividends at the end of 2019.
Requirements:
(1) Prepare cash flow statement for the period ended on Dec 31, 2019 using direct method
(2) Prepare cash flow statement for the period ended on Dec 31, 2019 using indirect method
(3) Determine the balance of free cash flows on Dec 31, 2019 under both methods and comment on it.
Answer & Explanation
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