Presented below is the comparative balance sheet for Diatessaron Inc., a private company reporting under ASPE, at December 31, 2021, and 2020:

Additional information:

1. Cash dividends of $15,000 were declared.

2. A long-term investment was acquired for cash at a cost of $101,500.

3. Depreciation expense is included in the operating expenses.

4. The company issued 10,500 common shares for cash on March 2, 2021. The fair value of the shares was $10 per share. The proceeds were used to purchase additional equipment.

5. Equipment that originally cost $30,000 was sold during the year for cash. The equipment had a carrying value of $9,000 at the time of sale.

6. The company issued a note payable for $28,000 and repaid $3,000 by year end.

7. All purchases of inventory are on credit.

8. Accounts payable is used only to record purchases of inventory.

Instructions

a. Prepare a cash flow statement for the year using the indirect method.

b. Prepare a cash flow statement for the year using the direct method.

Taking It Further

Is it necessary to show both the proceeds from issuing a new note payable and the partial repayment of notes payable? Or is it sufficient to simply show the net increase or decrease in notes payable, as is done with accounts payable? Explain.

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DIATESSARON INC. Balance Sheet December 31 Assets 2021 2020 $ 67,000 $ 98,000 Cash Accounts receivable 101,000 75,000 Inventory Long-term investment Property, plant, and equipment Accumulated depreciation 205,000 155,500 101,500 535,000 460,000 (162,500) (140,000) $847,000 $648,500 Liabilities and Shareholders' Equity $ 57,500 $ 47,000 Accounts payable Dividends payable Income tax payable Long-term notes payable 6,000 14,000 15,000 25,000 Common shares 630,000 525,000 Retained earnings 114,500 61,500 $847,000 $648,500 DIATESSARON INC. Income Statement Year Ended December 31, 2021 Sales $663,000 Cost of goods sold 432,000 Gross profit 231,000 Operating expenses Loss on sale of equipment Profit from operations Interest expense $147,500 3,000 150,500 80,500 3,000 Interest revenue (4,500) (1,500) Profit before income tax 82,000 Income tax expense 14,000 Profit $ 68,000