Question 2 (24 marks, 45 minutes)

Quichi Supplies Inc. drafted the following statement of comprehensive income at December 31, 2017. Ignore income taxes.

Statement of Comprehensive Income
Revenue products		$1,000,000
Revenue service		8,000
Cost of goods sold
Beginning inventory	500,000
Purchases	400,000
Cost of goods available for sale	900,000
Ending inventory	300,000
Cost of goods sold		600,000
Loss on discontinued operations		5,000
Operating expenses		345,000
Interest expense		20,000
Depreciation expense (equipment)		58,000
Unrealized gain on FV-OCI Investments		65,000
Net income		45,000

Additional information:

• Accounts receivable decreased $20,000 during the year.
• Accounts payable increased $15,000 during the year.
• Prepaid expenses increased $5,000 during the year.
• Income taxes payable decreased $3,000 during the year.
• Accrued interest payable increased $2,000 during the year.
• Common share capital increased $6,000 during the year bringing the total common shares outstanding to 200,000.
• Accumulated depreciation (equipment) increased $38,000 during the year.
• Included in operating expenses is a loss on disposal of partly depreciated equipment (cost $44,000; proceeds from disposal $1,000). This was the only disposal of equipment in the year.
• Dividends payable decreased $4,000 during the year.
• Shareholders equity increased $46,000 during the year.
• FV-NI investments were sold at book value, $70,000.
• Assets held for sale with a net book value of $17,000 were sold during the year. Loss on discontinued operations contains only the loss on sale of assets held for sale.
• Unearned revenue at January 1, 2017 was $8,000. Quichi demands advance payment for their services. During 2017, none of their clients paid for services.
• Quichi adopted a policy of reporting the cash flows arising from the payments of dividends and interest as a financing activity.

Requirements:

1. Prepare a corrected statement of comprehensive income. (8 marks)
2. Prepare Quichis statement of cash flows using the indirect method. (14.5 marks)
3. Give three examples of Quichis required disclosures for the cash flow statement. (1.5 marks)

Question 3 (16 marks, 30 minutes)