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Question 3 (30 marks) The comparative statement of financial positions and statement of profit or loss of Chloe Electronics Limited are as follows: Chloe Electronics Limited Statement of financial positions /Balance Sheets At 31 December 2019 2018 Assets: Cash Accounts receivable Merchandise inventory Long-term investments Equipment Accumulated depreciation Total assets 234,534 64,360 146,250 111,800 551,000 (67.100) 1.040,844 246,080 58,800 123,420 112,800 291,000 (62.400) 769,700 Liabilities: Accounts payable Profit taxes payable Bonds payable Total liabilities 113,654 21,450 97,500 232,604 80,760 20,400 132,000 233,160 Equity: Ordinary shares Retained profits Total equity Total liabilities and equity 260,000 548,240 808,240 1,040,844 210,000 326,540 536,540 769,700 Chloe Electronic Limited Statement of profit or loss For Year Ended 31 December 2019 1,180,000 361.800 Sales Less: Cost of goods sold Depreciation expense (Equipment) Other operating expenses Interest expense Other gains (losses): Loss on sale of equipment Profit before taxes Profit taxes expense Net profit 58,800 96,000 4,000 (520,600) (16,800) 642,600 (55,300) 587,300 Additional Information: (1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2) Old equipment with an original cost of $75,500 was sold with a loss. (3) Additional ordinary shares were issued for cash. Required: (a) Prepare a statement of cash flows for the year ended 2019 using the indirect method. (b) Briefly explain why the net income of the company was positive but the cash flows of the company decreased in 2019

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