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Homework answers / question archive / The income statement of Kyonggi Inc

The income statement of Kyonggi Inc


The income statement of Kyonggi Inc. in Suwon, Korea, contains the following condensed information (currency unit in thousand Korean won, ? 000’s):


Income Statement

Year Ended December 31, 2019

Sales                                                                                                 ? 6,583,000

Cost of goods sold                                                                               3,427,000

Gross profit                                                                                           3,156,000

Operating expenses                                                                             2,349,000

Profit from operations                                                                             807,000

Interest expense                                                                                     124,000

Profit before income tax                                                                         683,000

Income tax expense                                                                               203,000

Profit                                                                                                  ?   480,000

Kyonggi Inc. showed the following selected current asset and current liability balances on its year-on-year comparative statement of financial position on December 31, 2019:

2019                2018            Increase (Decrease)

Cash                                            ?150,000         ? 30,000             ?120,000

Accounts receivable                      775,000           610,000               165,000

Merchandise inventory               834,000           867,000               (33,000)

Accounts payable                          521,000           501,000                20,000

Income tax payable                        53,000            25,000                28,000

Additional information:

  1. The company uses a perpetual inventory system.
  2. Operating expenses include salaries expense of ?1,000,000, depreciation expense of ?300,000, amortization expense of ?80,000, and a loss on the disposal of machinery of ?24,000.
  3. Used machinery was sold for ?270,000, at a loss of ?24,000.
  4. New machinery was purchased during the year for ?1,250,000. It was partially financed by a bank loan payable issued for ?400,000.
  5. Dividends paid in 2019 totaled ?100,000.


  1. Prepare the statement of cash flows using the indirect method. (40%)
  2. Prepare the statement of cash flows using the direct method. (40%)
  3. Identify the similarities and differences between your answers in parts A and B. (20%)

Option 1

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Option 2

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