The financial statements of Wetaskiwin Ltd., a private company reporting under ASPE, follow:

Additional information:

1. Short-term notes receivable are loans to other companies. During the year, the company collected the outstanding balance at December 31, 2020, and made new loans in the amount of $14,000.

2. Equipment was sold during the year. This equipment cost $15,000 originally and had a carrying amount of $10,000 at the time of sale.

3. Equipment costing $10,000 was purchased in exchange for a $10,000 note payable.

4. Depreciation expense is included in operating expenses.

5. Accounts receivable are from the sale of merchandise on credit.

6. Accounts payable relate to the purchase of merchandise on credit.

Instructions

a. Prepare a cash fl ow statement for the year using the indirect method.

b. Prepare the operating section of the cash fl ow statement using the direct method.

Taking It Further

Wetaskiwin Ltd. had a relatively small change in its cash balance in 2021; cash decreased by only $1,000. Is it still necessary or important to prepare a cash flow statement? Explain.

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WETASKIWIN LTD. Balance Sheet December 31 Assets 2021 2020 Cash $ 9,000 $ 10,000 Short-term notes receivable 14,000 23,000 Accounts receivable 28,000 14,000 Inventory Property, plant, and equipment Accumulated depreciation 29,000 25,000 73,000 78,000 (30,000) (24,000) Total assets $123,000 $126,000 Liabilities and Shareholders' Equity $ 25,000 $ 43,000 Accounts payable Income tax payable Notes payable 3,000 20,000 15,000 10,000 Common shares 25,000 25,000 Retained earnings 55,000 28,000 Total liabilities and shareholders' equity $123,000 $126,000 WETASKIWIN LTD. Income Statement Year Ended December 31, 2021 Sales $286,000 Cost of goods sold Gross profit 194,000 92,000 $38,000 Operating expenses Loss on sale of equipment Profit from operations Other revenues and expenses 2,000 40,000 52,000 (1,000) 2,000 Interest revenue Interest expense 1,000 Profit before income tax 51,000 Income tax expense 15,000 Profit $ 36,000