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The income statement of Kyonggi Inc

Accounting

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

KYONGGI INC.

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.

Instructions:

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%)