Question

In: Accounting

(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.

 

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.

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