Comparative balance sheet accounts of Jensen Limited, which follows IFRS, appear below:
JENSEN LIMITED
Balance Sheet Accounts
December 31, 2011, and 2010

Data from Jensen€™s 2011 income statement follow:

Additional data:
1. Equipment that cost $10,000 and was 40% depreciated was sold in 2011.
2. Cash dividends were declared and paid during the year.
3. Common shares were issued in exchange for land.
4. FV-NI investments that had cost $35,000 and had a fair value of $37,000 at December 31, 2010, were sold during the year for proceeds of $50,000. Additional purchases of FV-NI investments were made during 2011.
5. Cost of goods sold includes $115,000 of direct labour and benefits and $11,700 of pension costs. Operating expenses include $76,000 of wages and $8,000 of pension expense.
6. Jenson has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities on the statement of cash flows.
Instructions
(a) Prepare a statement of cash flows using the indirect method, including all required disclosures.
(b) Prepare the €œCash provided by (or used in) operating activities€ section under the direct method.
(c) Does Jensen Limited have any options available for the classification of interest and dividends paid or received?
(d) Comment on the company€™s cash activities during the year.
(e) Assume that you are a shareholder of Jensen Limited. What do you think of the dividend payout ratio that is high-lighted in the statement of cash flows?

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2010 Debit balances Cash Accounts receivable Merchandise inventory Long term investments (FV-NI) Deferred income tax asset Equipment Building Land 2011 80,000 138,500 75,000 59,000 6,500 70,000 145,000 40,000 $614,000 51,000 119,000 61,000 80,000 11,000 48,000 145,000 25,000 $540,000 2011 2010 Credit balances Allowance for doubtful accounts Accumulated depreciation equipment Accumulated depreciation building Accounts payable Income taxes payable Long-term notes payable Accrued pension liability Common shares Retained earnings $10,000 21,000 37,000 72,500 12,000 62,000 7,500 300,000 92,000 $ 8,000 14,000 28,000 60,000 10,000 70,000 10,000 250,000 90,000 $540,000 $614,000 Sales Less: Cost of goods sold Gross profit Less: Operating expenses (includes depreciation and bad debt expense) Income from operations Other revenues and expenses Interest expense $960,000 600,000 360,000 250,000 110,000 Gain on investments (FV-NI) Loss on sale of equipment $ (10,000) 24,000 (3,000) Income before taxes Income taxes 11,000 121,000 45,000