In: Accounting
The comparative statements of financial position for Hinckley SA include the following information.
Hinckley SA Comparative Statements of Financial Position as of December 31
2020 2019
Property, plant & equipment $236,500 $150,000
Accumulated depreciation (37,700) (25,000)
Long-term investments 0 15,000
Inventory 35,000 42,000
Accounts receivable (net) 43,300 20,300
Cash 30,900 10,200
$308,000 $212,500
Share capital-ordinary $130,000 $90,000
Retained earnings 70,000 29,000
Long-term notes payable 70,000 50,000
Accounts payable 21,000 17,000
Accrued liabilities 17,000 26,500
$308,000 $212,500
Additional information concerning transactions and events during 2020 are presented below.
1. Net income for the year, $76,000.
2. Depreciation on plant assets for the year, $12,700.
3. Sold the long-term investments for $28,000.
4. Cash dividends of $35,000 were declared and paid.
5. Purchased machinery costing $26,500 and paid cash.
6. Purchased machinery and gave a $60,000 long-term note payable.
7. Paid a $40,000 long-term note payable by issuing ordinary shares.
Required:
(a) Using the indirect method, prepare a statement of cash flows for Hinckley SA for the year ended December 31, 2020 with significant non-cash transactions disclosed in the notes.
(b) In reporting a statement of cash flows, the choice of either the direct or indirect method is available under the IFRS. Compare the two methods and discuss the differences between them.