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Natalie has prepared the balance sheet and income statement ofCookie & Coffee Creations Inc. and would like you to preparethe cash flow statement. The comparative balance sheet of Cookie& Coffee Creations Inc. at October 31, 2020 for the years 2020and 2019 and the income statement for the year ended October 31,2020, are presented below.

Additional information:

1.   Equipment (cost $4,500 and book value $3,000) wasdisposed of at the beginning of the year for $500 cash and replacedwith new equipment purchased for $4,000 cash.

2.   Additional equipment was bought for $14,000 onNovember 1, 2019. A $12,000 note payable was signed. The termsprovide for equal semi-annual installment payments of $2,000 on May1 and November 1 of each year, plus interest of 5% on theoutstanding principal balance.

3.   Other equipment was bought for $13,000 cash.

4.   Dividends were declared on the preferred andcommon stock on October 15, 2020, to be paid on November 15,2018.

5.   Accounts payable relate only to merchandisecreditors.

6.   Prepaid expenses relate only to other operatingexpenses.

Instructions:

(a) Prepare a statement of cash flows for Cookie & CoffeeCreations Inc. for the year ended October 31, 2020, using theindirect method.

*(b)           Prepare a statement of cash flows for Cookie & Coffee CreationsInc. for the year ended October 31, 2020, using the directmethod.

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31,

Assets	2020	2019
Cash	$ 22,324	$5,550
Accounts receivable	3,250	2,710
Inventory	7,897	7,450
Prepaid expenses	5,800	6,050
Equipment	102,000	75,500
Accumulated depreciation—
equipment	(25,200)	(9,100)
Total assets	$116,071	$88,160

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31,

Liabilities and Stockholders’ Equity	2020		2019
Accounts payable	$ 1,150		$ 2,450
Income taxes payable	9,251		7,200
Dividends payable	27,000		27,000
Salaries and wages payable	7,250		1,280
Interest payable	188		0
Note payable	10,000		0
Preferred stock, no par, $6 cumulative,
3,000 and 2,800 shares issued,
respectively	15,000		14,000
Common stock, $1 par—25,180 shares
issued and outstanding	25,180		25,180
Additional paid-in capital—treasury stock	250		250
Retained earnings	20,802		10,800
Total liabilities and stockholders’ equity	$116,071		$88,160

COOKIE & COFFEE CREATIONS INC.

Income Statement

Year Ended October 31, 2020

Sales		$485,625
Cost of goods sold		222,694
Gross profit		262,931
Operating expenses
Salaries and wages expense	$147,979
Depreciation expense	17,600
Other operating expenses	48,186	213,765
Income from operations		49,166
Other expenses
Interest expense	$    413
Loss on disposal of plant
assets	2,500	2,913
Income before income tax		46,253
Income tax expense		9,251
Net income		$ 37,002