Financial statements for Discovery Company follow:

DISCOVERY COMPANY
Statement of Financial Position
As of 31 December		20X4				20X3
Assets
Current assets:
Cash		$	25,000			$	21,800
Accounts receivable			695,900				667,700
Inventory			567,800				519,000
Total current assets			1,288,700				1,208,500
Land			473,100				204,500
Plant and equipment			2,379,100				1,648,400
Less: Accumulated depreciation			(1,213,700	)			(1,197,200	)
Patents			125,600				132,300
Total assets		$	3,052,800			$	1,996,500
Liabilities and shareholders equity
Liabilities:
Current liabilities:
Accounts payable		$	391,900			$	431,200
Salaries and wages payable			61,800				57,300
Income tax payable			144,500				135,100
Total current liabilities			598,200				623,600
Long-term debt			1,499,100				811,000
Total liabilities			2,097,300				1,434,600
Shareholders equity:
Common shares, no-par			247,300				245,400
Retained earnings			708,200				316,500
Total shareholders equity			955,500				561,900
Total liabilities and shareholders equity		$	3,052,800			$	1,996,500

DISCOVERY COMPANY
Statement of Comprehensive Income
For the year ended 31 December 20X4
Sales revenue							5,043,300
Less expenses:
Cost of goods sold		$	2,782,000
Selling and administrative expenses			742,800
Depreciation and amortization			252,200
Rent expense			20,500
Miscellaneous expenses			194,100
Total expenses							3,991,600
Other revenues and expenses:
Interest expense			47,300
Gain on sale of equipment			(8,100	)
Loss on debt retirement			14,900				54,100
Earnings before income tax							997,600
Income tax expense							424,600
Net earnings and comprehensive income						$	573,000

Additional information:

1. The company sold equipment that had an original cost of $397,800 and a net book value of $168,800. Other equipment was purchased for cash. Patent amortization was $6,700.
2. Long-term debt with a face value of $670,000 was repaid during the year and other long-term debt was issued at a lower interest rate.
3. The company issued shares for land during the period. Other common shares were retired (bought back and cancelled) at book value.
4. 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. (Deductible amounts and Cash outflows should be indicated with minus sign.)

2. Prepare the SCF, using the direct method to present cash flows in the operating activities section. (Deductible amounts and Cash outflows should be indicated with minus sign.)

DISCOVERY COMPANY Statement of Cash Flows For the year ended 31 December 20X4 Operating activities: Net earnings Adjustments for non-cash items: Depreciation and amortization Gain on sale of equipment Loss on debt retirement 0 Total adjustment Changes in net working capital: Accounts receivable increase Inventory increase Accounts payable decrease Salaries and wages payable increase Income tax payable increase les ol Net cash flows from operations Investing activities: Sale of equipment Purchase of equipment 0 Net cash flows used for investing Financing activities: Common shares retired Long-term debt retired Long-term debt issued Cash dividends paid 0 Net cash flows from financing Net increase in cash Cash balance beginning of the year Cash balance end of the year S 0 DISCOVERY COMPANY Statement of Cash Flows For the year ended 31 December 20X4 Operating activities: les 0 Investing activities: 0 Financing activities: 0 Cash balance beginning of the year Cash balance end of the year S 0