The Stement of Cash Pows LOS Problem 12-3 Statement of Cash Flows-Direct Method Peoria Corp. just completed another successful year, as indicated by the following statement: For the Year Ended...

The Stement of Cash Pows LOS Problem 12-3 Statement of Cash Flows-Direct Method Peoria Corp. just completed another successful year, as indicated by the following statement: For the Year Ended December 31, 2016 51.250.000 200.000 $ 550.000 450.000 $ 400.000 Sales revenue Cost of goods sold Gross profit Operating expenses Income before interest and Interest expense Income before the Income tax expense Nos income 5375 000 150 000 $225.000 Presented here are comparative balance sheets Accounts receivable Inventory Propayments Total current assets Land Plant and equipment Accumulated depreciation Total long-term assets Total assets Accounts payable Other accrued liabilities Income taxes payable Total current liabilities Long-term bank loan payable Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity December 31 2016 2015 S52000 590 000 10000 130 000 230 000 200.000 15.000 25.000 $ 477,000 $.000 $750,000 $ 800.000 700 000 500.000 1250 000 200.000 $1.200 000 $ 900.000 $1,677 000 51.345.000 $ 130 000 $ 148.000 691000 63.000 90 000 110.000 $ 288 000 $ 321 000 $ 350.000 $ 300.000 $ 550.000 $ 400.000 R9000 324 000 $1,029.000 $ 724 000 $1,677,000 $135.000 Other information is as follows: a. Dividends of $60,000 were declared and paid during the year. b. Operating expenses include $50,000 of depreciation c. Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans. The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $50,000. Required 1. Prepare a statement of cash flows for 2016 using the direct method in the Operating Activ ities section. 2. On the basis of your statement in part (1), draft a brief memo to the president to explain why cash decreased during such a profitable year. Include in your explanation any recom- mendations for improving the company's cash flow in future years?