The statement of income of Kneale Transport Inc. for the year ended December 31, 2020, reported the following condensed information:

Kneale?s statement of financial position included the following comparative data at December 31:

Additional information:Operating expenses include $70,000 in depreciation expense. The company follows IFRS. Assume that interest is treated as an operating activity for purposes of the statement of cash flows.

Instructions

a. Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, using the

1. indirect method and

2. direct method.

b. Digging Deeper From the perspective of an external user of Kneale Transport?s financial statements, discuss the usefulness of the statement of cash flows prepared using either the indirect or the direct method.

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Kneale Transport Inc. Year Ended December 31, 2020 Statement of Income Service revenue $545,000 Operating expenses 370,000 Income from operations Other revenues and expenses Gain on disposal of equipment Interest expense 175,000 $25,000 10,000 15,000 Income before income tax 190,000 42,000 Income tax Net income $148,000 2020 2019 Accounts receivable Prepaid insurance Accounts payable Interest payable Income tax payable Unearned revenue $50,000 $60,000 5,000 30,000 2,000 41,000 750 4,500 10,000 14,000