Laflamme Inc. follows IFRS and has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Comparative general ledger accounts of Laflamme, and its statement of income for the year ended December 31, 2023, follow:

December 31

2023 2022 Change

Cash $ 46,000 $ 56,000 $ (10,000)

Cash equivalents (Note 1) 36,000 45,000 (9,000)

Accounts receivable 348,000 271,000 77,000

Prepaid insurance 16,000 35,000 (19,000)

Inventory 398,000 350,000 48,000

Supplies 13,000 17,000 (4,000)

Long-term investment, at equity (Note 7) 418,000 400,000 18,000

Land (Note 6) 640,000 500,000 140,000

Buildings (Note 3) 1,310,000 1,280,000 30,000

Accumulated depreciationbuildings (400,000) (360,000) (40,000)

Equipment (Note 4) 632,000 640,000 (8,000)

Accumulated depreciationequipment (160,000) (135,000) (25,000)

Patent 100,000 100,000 0

Accumulated amortization (40,000) (35,000) (5,000)

$3,357,000 $3,164,000 $193,000

Bank overdrafts (temporary) $ 0 $ 93,000 $ (93,000)

Accounts payable 165,000 150,000 15,000

Income tax payable 26,000 35,000 (9,000)

Accrued liabilities 57,000 41,000 16,000

Dividends payable 20,000 50,000 (30,000)

Long-term notes payable 420,000 460,000 (40,000)

Bonds payable 999,000 995,000 4,000

Preferred shares (Note 2) 486,000 380,000 106,000

Common shares 746,000 666,000 80,000

Retained earnings 438,000 294,000 144,000

$3,357,000 $3,164,000 $193,000

Income Statement

Revenues

Sales revenue $ 999,000

Investment income 90,000 $1,089,000

Expenses and losses

Cost of goods sold 314,000

Sales commission expense 108,000

Operating expenses (Note 5) 166,000

Salaries and wages expense 104,000

Interest expense 95,000

Loss on disposal of equipment (Note 4) 11,000

Income tax expense 96,000 894,000

Net income $ 195,000

The following is additional information about Laflammes transactions during the year ended December 31, 2023.

The cash equivalents are typically term deposits that are very liquid and mature on average in 60 days. The bank overdrafts are temporary and reverse within a few days. Laflamme has opted to show these as cash and cash equivalents on its statement of cash flows. During the year, preferred shares with a carrying amount of $18,000 were converted to common shares. There were no disposals of buildings during the year 2023. Equipment with an original cost of $46,000 and carrying amount of $14,000 was sold at a loss during the year. All depreciation and amortization expense is included in operating expenses. During the year, Laflamme obtained land with a fair value of $100,000 in exchange for its preferred shares. Investment income includes the equity earnings of $62,000 from a long-term investment accounted for using the equity method and from interest revenue on the short-term investments referred to in note 1 above.

Instructions

Prepare the statement of cash flows for the year ended December 31, 2023, for Laflamme using the indirect method. Prepare any additional disclosure notes that are required, including a table that shows the details of the cash and cash equivalents accounts at the end of each period. Prepare the operating activities section of the statement using the direct format. Does Laflamme have any options available to it concerning the classification of interest and dividends paid or received? An icon reads, Digging Deeper. If Laflamme chose not to treat the cash equivalents and the temporary bank overdrafts as cash and cash equivalents, how would transactions related to these accounts be reported on the statement of cash flows?