Financial statements for Discovery Co. follow:

Additional information:

a. The company sold equipment that had an original cost of $584,000 and a net book value of $247,600. Other equipment was purchased for cash. Patent amortization was $8,000.

b. Long-term debt with a face value of $800,000 was repaid during the year and other long-term debt was issued at a lower interest rate.

c. The company issued shares for land during the period. Other common shares were retired (bought back and cancelled) at book value.

d. Assume unexplained changes in accounts stem from logical transactions.

Required:

1. Prepare the SCF, using the indirect method. Use the two-step method for operations. Omit the separate disclosure of cash flows for interest, investment income, and income tax.

2. Prepare the SCF, using the direct method to present cash flows in the operating activities section.

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DISCOVERY co. Statement of Financlal Position As of 31 December 20X4 20X3 Assets Current assets: Cash $ 37,000 $ 32,000 Accounts receivable 1,030,000 980,000 Inventory 840,000 761,600 Total current assets 1,907,000 1,773,600 Land 700,000 300,000 Plant and equipment 3,520,000 2,418,000 Less: accumulated depreciation (1,781,600) (1,756,000) Patents 186,000 194,000 Total assets $4.531.400 $2,929,600 Llabilitles and Shareholders' Equity Liabilities: Current liabilities: Accounts payable $ 580,000 $ 632,400 Salaries and wages payable 91,400 84,200 Income tax payable 213,800 198,600 Total current liabilities 885,200 915,200 Long-term debt 2,218.000 1.190,000 Total liabilities 3,103,200 2,105,200 Shareholders' equity: Common shares, no par 366,000 360,000 Retained earnings 1.062,200 464.400 Total shareholders' equity 1,428,200 824,400 Total liabilities and shareholders' equity $4.531.400 $2,929,600 DISCOVERY Co. Statement of Comprehensive Income