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Sage Hill Inc.s CFO has just left the office of the company president after a meeting about the draft SFP at April 30, 2020, and

Sage Hill Inc.s CFO has just left the office of the company president after a meeting about the draft SFP at April 30, 2020, and income statement for the year then ended. (Both are reproduced below.) Our liquidity position looks healthy, the president had remarked. Look at the current and acid-test ratios, and the amount of working capital we have. And between the goodwill write off and depreciation, we have almost $23 million of non-cash expenses. I dont understand why youve been complaining about our cash situation. The CFO turns the draft financial statements over to you, the newest member of the accounting staff, along with extracts from the notes to the financial statements.

SAGE HILL INC. Consolidated Statement of Financial Position April 30, 2020, and 2019 (in $000s)
Assets 2020 2019
Cash and 60-day treasury bills $3,266 $3,743
Accounts receivable 23,747 18,414
Inventory 26,085 21,569
Income tax receivable 145 0
Prepaid expenses

1,409

1,621

54,652 45,347
Investments (Note 1) 5,962 6,965
Property, plant, and equipment (Note 2) 37,331 45,699
Deferred tax asset 4,880 2,273
Intangible assetsfranchises (Note 3) 4,391 1,911
Goodwill 0 12,746

$107,216

$114,941

Liabilities
Current
Bank overdraft (temporary) $ 7,539 $ 6,356
Accounts payable and accrued liabilities (Note 4) 3,241 4,710
Current portion of long-term debt

1,800

1,200

12,580

12,266

Long-term debt (Note 5)

14,900

14,500

Shareholders Equity
Share capital (Note 6) 78,257 62,965
Retained earnings 1,479 25,210

79,736

88,175

$107,216

$114,941

Consolidated Statement of Income and Retained Earnings Year Ended April 30, 2020, and 2019 (in $000s)
Revenue 2020 2019
Sales revenue $89,821 $68,820
Interest and other 1,310 446
91,131 69,266
Expenses
Cost of goods sold 53,400 40,101
General and administrative 10,415 10,982
Salaries and wages expense 26,624 24,500
Depreciation and amortization 10,220 11,709
Loss on impairment (goodwill) 12,746 0
Interest 1,298 1,530
Loss on disposal of capital assets 392 0
115,095 88,822
Loss before equity loss and income tax (23,964 ) (19,556 )
Investment income (loss) (Note 1)

(2,519

)

101

Loss before income tax (26,483 ) (19,455 )
Income tax benefit

2,752

5,161

Net loss (23,731 ) (14,294 )
Retained earnings, beginning of year

25,210

39,504

Retained earnings, end of year 1,479 25,210

Draft Notes to the Financial Statements
For the Year Ended April 30, 2020

Note 1. Investments The companys investments at April 30 are as follows (in $000s):

2020 2019
Compuco Ltd. (fair value 2020, $4.3 million)
Associates shares, opening balance at equity $6,965 $6,864
Equity income (loss)

(2,519

)

101

Associates shares, ending balance at equity 4,446 6,965
Other investments, at amortized cost

1,516

0

$5,962 $6,965

Note 2. Property, Plant, and Equipment Additions to property, plant, and equipment for the current year amounted to $2,291,000. Proceeds from the disposal of property, plant, and equipment amounted to $250,000. Note 3. Intangible AssetsFranchises Franchise fees are amortized over the term of 20 years using the straight-line method. Note 4. Accounts Payable and Accrued Liabilities (in $000s)

2020 2019
Accounts payablesuppliers $3,100 $4,560
Salaries and wages payable

141

150

$3,241 $4,710

Note 5. Long-Term Debt (in $000s)

2020 2019
Debentures $12,500 $12,500
Bank term loans, due April 30, 2021, principal repayable at $150,000 a month (2019, at $100,000 a month) 4,200 3,200
16,700 15,700
Current maturities

(1,800

)

(1,200

)
$14,900 $14,500

Debentures bear interest at 9% per annum and are due in 2022. Bank term loans bear interest at 8% and the bank advanced $2.2 million during the year. Note 6. Share Capital On September 14, 2019, Sage Hill Inc. issued 3.8 million shares with special warrants. Net proceeds from issuing the 3.8 million shares amounted to $14,393,000. Net proceeds from issuing the 3.8 million warrants amounted to $899,000. Assume that Sage Hill Inc. follows IFRS and has adopted the policy of classifying interest paid and dividends received as operating activities, and dividends paid as financing activities.

Part 1

Prepare a statement of cash flows for the year ended April 30, 2020, on a non-comparative basis from the information provided. The CFO wants to use the direct method to report the companys operating cash flows this year. Include all required disclosures. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000). Do not leave any answer field blank. Enter "0" for amounts. Enter amounts in thousands.)

Sage Hill Inc. Consolidated Statement of Cash Flows For the Year Ended April 30, 2020For the Month Ended April 30, 2020April 30, 2020

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