The comparative statements of financial position for Hinckley SA include the following information.

Additional information concerning transactions and events during 2020 are presented below.

1. Net income for the year, $76,000.

2. Depreciation on plant assets for the year, $12,700.

3. Sold the long-term investments for $28,000.

4. Cash dividends of $35,000 were declared and paid.

5. Purchased machinery costing $26,500 and paid cash.

6. Purchased machinery and gave a $60,000 long-term note payable.

7. Paid a $40,000 long-term note payable by issuing ordinary shares.

Required:

(a) Using the indirect method, prepare a statement of cash flows for Hinckley SA for the year ended December 31, 2020 with significant non-cash transactions disclosed in the notes. (16 marks)

(b) In reporting a statement of cash flows, the choice of either the direct or indirect method is available under the IFRS. Compare the two methods and discuss the differences between them. (4 marks)

Hinckley SA Comparative Statements of Financial Position as of December 31 2020 2019 Property, plant & equipment Accumulated depreciation Long-term investments Inventory Accounts receivable (net) Cash $236,500 (37,700) 0 35,000 43,300 30,900 $308,000 $150,000 (25,000) 15,000 42,000 20,300 10,200 $212.500 Share capital-ordinary Retained earnings Long-term notes payable Accounts payable Accrued liabilities $130,000 70,000 70,000 21,000 17,000 $308,000 $90,000 29,000 50,000 17,000 26,500 $212.500