Question

P5.11 A comparative statement of financial position for Spencer Corporation follows:

Spencer Corporation
Statement of Financial Position
December 31
Assets  
2020
2019
Cash  
$ 65,000 
$ 29,000 
Accounts receivable  
87,000 
59,000 
Inventory  
133,000 
81,000 
FV-OCI investments in shares  
63,000 
84,000 
Land  
65,000 
103,000 
Equipment  
390,000 
430,000 
Accumulated depreciation—equipment  
(117,000)
(86,000)
Goodwill  
 124,000 
 173,000 
 Total  
$810,000 
$873,000 
Liabilities and Shareholders' Equity      
Accounts payable  
$ 12,000 
$ 51,000 
Dividends payable  
15,000 
32,000 
Notes payable  
220,000 
335,000 
Common shares  
265,000 
125,000 
Retained earnings  
288,000 
284,000 
Accumulated other comprehensive income  
  10,000 
  46,000 
 Total  
$810,000 
$873,000 
Additional information:

1. Net income for the fiscal year ending December 31, 2020, was $19,000.
2. In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $86,000 was sold for proceeds of $95,000.
3. In April 2020, notes payable amounting to $140,000 were retired through the issuance of common shares. In December 2020, notes payable amounting to $25,000 were issued for cash.
4. FV-OCI investments were purchased in July 2020 for a cost of $15,000. By December 31, 2020, the fair value of Spencer's portfolio of FV-OCI investments decreased to $63,000. No FV-OCI investments were sold in the year.
5. On December 31, 2020, equipment with an original cost of $40,000 and accumulated depreciation to date of $12,000 was sold for proceeds of $21,000. No equipment was purchased in the year.
6. Dividends on common shares of $32,000 and $15,000 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities.
7. A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year.
Instructions
a. Prepare a statement of cash flows using the indirect method for cash flows from operating activities along with any necessary note disclosure.

b. From the perspective of a shareholder, comment in general on the results reported in the statement of cash flows.

Answer 1