Strong House Inc. had the following condensed statement of financial position at December 31, 2022:

Strong House follows IFRS and chooses to classify dividends paid as financing activities and interest paid as operating activities on the statement of cash flows. During 2023, the following occurred:

1. Strong House sold part of its investment portfolio in bonds for $15,500, resulting in a gain of $500.

2. Dividends totalling $19,000 were paid to shareholders.

3. A parcel of land, to be used as a parking lot, was purchased for $5,500.

4. Common shares were issued for cash totalling $20,000.

5. Bonds payable of $10,000 were retired at par.

6. Equipment was purchased through the issuance of $32,000 of bonds.

7. Net income for 2023 was $42,000 after allowing for depreciation on Strong House’s plant assets of $13,550. The amount of interest paid during 2023 was $4,150 and the amount of income taxes paid was $19,500.

8. Both current assets (other than cash) and current liabilities remained at the same amount.

Instructions

a. Prepare a statement of cash flows for 2023 using the indirect method.

b. Draft a one-page letter to Gerald Brauer, president of Strong House, in which you briefly explain the changes within each major cash flow category. Refer to the statement of cash flows whenever necessary.

c. Prepare a condensed statement of financial position at December 31, 2023, for Strong House.

d. Comment briefly about why the statement of cash flows used to be called a statement of changes in financial position. What additional relevant disclosure in financial reporting has been achieved with the change from the former statement of changes in financial position to the current statement of cash flows?

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Strong House Inc. Statement of Financial Position December 31, 2022 Cash Current assets (non-cash) Bond investment at amortized cost Plant assets (net) Land $ 10,000 34,000 40,000 57,500 38,500 $180,000 Current liabilities Long-term notes payable Bonds payable Common shares Retained earnings $ 14,500 30,000 32,000 80,000 23,500 $180,000