How does Declan’s Designs’ Net Income impact its the 2022 Statement of Cash Flows

How does Declan’s Designs’ Net Income impact its the 2022 Statement of Cash Flows? Question 15 options: Net Income is included as an increase in Cash Flows from Operations Net Income is included as an increase in Cash Flows from Financing Net Income is included as a decrease in Cash Flows from Operations Net Income is included as a decrease in Cash Flows from Operations Net Income is included as a decrease in Cash Flows from Financing Net Income is not included on the Statement of Cash Flows Net Income is included as an increase in Cash Flows from Investing Transcribed Image Text: ASSETS
12/31/2021
12/31/2022
For the Year Ending
Current Assets
Cash and Cash Equivalents
Accounts Receivable, Net
Merchandise Inventory
12/31/2022
$90,000
97,000
400,000
587,000
$294,000
101,000
475,000
870,000
Sales Revenue
$225,000
(16,000)
209,000
(22,000)
187,000
(12,000)
(5,000)
170,000
(7,000)
$163,000
CGS
Total Current Assets
Gross Margin
SG&A
PPE, Net
Goodwill, Net
62,000
600,000
$1,249,000
70,000
600,000
$1,540,000
Operating Income
Interest Expense
Loss on Sale of PPE
Total Assets
Pre-Tax Income
Income Tax Expense
LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts Payable
Interest Payable
Dividends Payable
Net Income
26,000
3,000
20,000
49,000
17,000
5,000
10,000
32,000
Additional Information regarding Declan’s Designs’ 12/31/22 financials:
Total Current Liabilities
Mortgage Payable
Long-Term Bank Loan
Total Liabilities
500,000
200,000
732,000
PROPERTY, PLANT & EQUIPMENT
PPE is shown net accumulated depreciation. Accumulated depreciation was $18,000 at the beginning of
the
500,000
and $20,000 at the end of the year. Depreciation expense for the year was $3,000, which is
year
included in SG&A. New PPE was bought during the year for $22,000 (in cash).
549,000
Shareholder’s Equity
Preferred Stock
Note: You may use the worksheet provided on the last page to you prepare the Cash Flow Statement.
8,000
54,000
638,000
700,000
Common Stock
Hint #1: The most recent year is not always in the left column.
Additional Paid in Capital
Retained Earnings
Total Shareholder’s Equity
10,000
60,000
738,000
808,000
Hint #2: Evaluate changes in gross PPE separate from changes in accumulated depreciation. Recall gross
PPE less accumulated depreciation equals net PPE.
Hint #3: Never “plug” the annual change in gross PPE. Separately evaluate the increase in gross PPE
(capital expenditures) from the annual decrease in gross PPE (sale of PPE).
Total Liabilities &Shareholders’ Equity
$1,249,000
$1,540,000
Hint #4: The total change in cash due to stock issuances/repurchases is the sum of the change in common
stock (stated par value) and additional paid in capital (APIC).
Hint #5: Dividends declared (the decrease in RE) is not the same as dividends paid (the decrease in
dividends payable). To find dividends paid, set up your dividends payable account with the beginning and
ending balances from the balance sheet. Increase dividends paid by the amount of dividends declared.
Then plug for the decrease in dividends payable (which represents dividends paid).

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