Spin Inc.

Income Statement

For the Year Ended October 31, 2020

Sales revenue $1,345,800

Cost of goods sold 814,000

Gross margin 531,800

Expenses

Salaries and wages expense 207,800

Interest expense 66,700

Other operating expenses 24,800

Depreciation expense 26,000

Total operating expenses 325,300

Operating income $206,500

Income tax expense 65,400

Net earnings $141,100

The following is additional information about transactions during the year ended October 31, 2020, for Spin Inc., which follows IFRS.

Plant assets costing $95,000 were purchased by paying $44,000 in cash and issuing 5,000 common shares.

The other expenses relate to prepaid items.

To supplement its cash, Spin Inc. issued 4,000 additional common shares.

There were no penalties assessed for the repayment of the mortgage.

Cash dividends of $78,000 were declared and paid at the end of the fiscal year.

Required:

Prepare a statement of cash flows, in good form, for Spin Inc. for the year ended October 31, 2020, using the indirect method.

Question 1 Statement of Cash Flows - Indirect Method Spin Inc., a major retailer of fitness equipment, operates several stores and is a publicly traded on the TSX stock exchange. The company is currently preparing its statement of cash flows and has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. The comparative statement of financial position and income statement for Spin Inc. as of October 31, 2020, are as follows: Spin Inc. Statement of Financial Position As of October 31 2020 2019 Current assets Cash Accounts receivable Inventory Prepaid expenses $ 33,250 74,800 188,700 8,800 $305,550 $ 20,000 55,600 199,000 7,000 $281,600 Total current assets 596,500 (148,000) 448,500 $754,050 501,500 (122,000) 379,500 $661,100 Plant assets Less: Accumulated depreciation Net plant assets Total assets Current liabilities Accounts payable Salaries and wages payable Interest payable Total current liabilities Mortgage payable Total liabilities Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $123,000 61,000 24,700 208,700 75,000 $283,700 $115,000 72,000 22,600 209,600 100,000 $309,600 335,750 134,600 470,350 $754,050 280,000 71,500 351,500 $661,100