Presented below is the comparative balance sheet for Diatessaron Inc., a private company reporting under ASPE, at December 31, 2021, and 2020:

Prepare cash flow statementsindirect and direct methods.

DIATESSARON INC.Balance SheetDecember 31

Assets

2021

2020

Cash

$ 67,000

$ 98,000

Accounts receivable

101,000

75,000

Inventory

205,000

155,500

Long-term investment

101,500

0

Property, plant, and equipment

535,000

460,000

Accumulated depreciation

(162,500)

(140,000)

$847,000

$648,500

Liabilities and Shareholders' Equity

Accounts payable

$57,500

$47,000

Dividends payable

6,000

0

Income tax payable

14,000

15,000

Long-term notes payable

25,000

0

Common shares

630,000

525,000

Retained earnings

114,500

61,500

$847,000

$648,500

DIATESSARON INC.Income StatementYear Ended December 31, 2021

Sales

$663,000

Cost of goods sold

432,000

Gross profit

231,000

Operating expenses

$147,500

Loss on sale of equipment

3,000

150,500

Profit from operations

80,500

Interest expense

3,000

Interest revenue

(4,500)

(1,500)

Profit before income tax

82,000

Income tax expense

14,000

Profit

$68,000

Additional information:

1. Cash dividends of $15,000 were declared.

2. A long-term investment was acquired for cash at a cost of $101,500.

3. Depreciation expense is included in the operating expenses.

4. The company issued 10,500 common shares for cash on March 2, 2021. The fair value of the shares was $10 per share. The proceeds were used to purchase additional equipment.

5. Equipment that originally cost $30,000 was sold during the year for cash. The equipment had a carrying value of $9,000 at the time of sale.

6. The company issued a note payable for $28,000 and repaid $3,000 by year end.

7. All purchases of inventory are on credit.

8. Accounts payable is used only to record purchases of inventory.

Instructions

a. Prepare a cash flow statement for the year using the indirect method.

b. Prepare a cash flow statement for the year using the direct method. (Weygandt, 2019-03-25, pp. 17-57-17-58)