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Skysong Inc. follows IFRS and has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Comparative SFP accounts of Skysong Inc., and its statement of income for the year ending December 31, 2020, follow: December 31 2020 2019 Change Cash $42.000 $48,000 $ 48,500 $16,000) (10,500) Cash equivalents (Note 1) 38,000 Accounts receivable 356,000 299,000 57.000 Prepaid insurance 17.700 34,600 (16.900) Inventory 411,000 367,100 43.900 13.000 17,000 (4,000) 421.000 412,000 9,000 Supplies Long-term investment, at equity (Note 7) , 7) Land (Note 6) Buildings (Note 3) ) Accumulated depreciation-buildings 632.000 516,000 116.000 1.310,000 1,280,000 30.000 (400,000) ) (360,000) (40,000) Equipment (Note 4) 629.000 637,400 (8,400) Accumulated depreciation-equipment (135,000) (25,000) ( (160,000) 100.000 Patent 100,000 -0- Accumulated amortization (40,000) (35,000) (5,000) $3,369.700 $3,229,600 $140,100 Bank overdrafts (temporary) $0 $86,500 $(86,500) Accounts payable 167.000 158,000 9,000 Income tax payable 26,000 35,000 (9.000) Accrued liabilities 55,000 41,000 14,000 Dividends payable 22.000 51,000 (29.000) Long-term notes payable 420,000 460,000 (40,000) 999,000 995,000 4,000 Bonds payable Preferred shares (Note 2) (2 486.000 380,000 106,000 Common shares 743,000 676,000 67,000 Retained earnings 104,600 451,700 $3,369,700 347,100 $3.229.600 $140,100 Income Statement Revenues Sales revenue $1,005,000 Investment income 90,000 $1,095,000 Expenses and Losses Cost of goods sold 315.000 110,000 Sales commissions expense Operating expenses (Note 5) ) Salaries and wages expense 166.000 101,000 Interest expense 97,000 Loss on disposal of equipment (Note 4) 11,000 Income tax expense 96,000 896,000 Net Income $199,000 The following is additional information about Skysong's transactions during the year ended December 31, 2020. 1. The cash equivalents are typically term deposits that are very liquid and mature on average in 60 days. The bank overdrafts are temporary and reverse within a few days. Skysong has opted to show these as cash and cash equivalents on its statement of cash flows. 2. During the year, preferred shares with a carrying amount of $18,000 were converted to common shares. 3. There were no disposals of buildings during the year 2020. 4. Equipment with an original cost of $46,000 and carrying amount of $14,000 was sold at a loss during the year. 5. All depreciation and amortization expense is included in operating expenses. During the year, Skysong obtained land with a fair value of $100,000 in exchange for its preferred shares. 6. 7. Investment income includes the equity earnings of $62,000 from a long-term investment accounted for using the equity method and from interest revenue on the short-term investments referred to in note 1 above. Your answer is partially correct. Prepare the statement of cash flows for the year ended December 31, 2020, for Skysong Inc. using the indirect method. Prepare any additional disclosure notes that are required, including a table that shows the details of the cash and cash equivalents accounts at the end of each period. (Show amounts that decrease cash flow with either a-signeg-15.000 or in parenthesis eg. (15,000L Do not leave any answer field blank Enter for amounts) Skysong Inc. Statement of Cash Flows (Indirect Method) For the year ended December 31, 2020 Cash Flows from Operatinz Activities Net Income /(Loss) V 199000 Increase in Inventory 199000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Expense-Equipment 166000 Loss on Sale of Equipment V 11000 Gainon Sale of Equipment V 22000 Increase in Accounts Receivable V -57000 Decrease in Prepaid Insurance V 16900 Increase in inventory V -43900 Decrease in Supplies 4000 Decrease in Accounts Payable V Increase in Accounts Payable 9000 Decrease in income Tax Payable V -9000 Increase in Accrued Liabilities V 14000 Interest Pald V Net Income / Loss -945000 -945000 Cash Flows from Investing Activities 1045000 Cash Flows from Investing Activities 2000 Proceeds from Issuance of Preferred Shares Purchase of Building -300000 Decrease in Supplies -10500 Purchase of Equipment -37600 Net Cash Used by investing Activities -75100 Cash Flows from Financine Activities Dividends Paid V -58900 Decrease in Supplies -40000 Proceeds from Issuance of Common Shares 4000 49000 Depreciation Expense - Buildings Net Cash Used by Financing Activities -45900 Increase in Cash and Cash Equivalents -16500 Cash and Cash Ecuivalents Balance Dec 31, 2019 96500 Cashand Cash Enuivalents Balance Dec.31. 2020 30000 Non-cash investing and financing activities Sale of Land Additional disclosures Decrease in Suolles Purchase of Equipment Cash and Cash Equivalents 2020 2019 Recayment of Long-term Notes Princial 199000 $ 19900C Temporary Bank Overdrafts 11000 1100C Temporary Bank Overdrafts 30000 1100C 80000 Skysong Inc. follows IFRS and has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Comparative SFP accounts of Skysong Inc., and its statement of income for the year ending December 31, 2020, follow: December 31 2020 2019 Change Cash $42.000 $48,000 $ 48,500 $16,000) (10,500) Cash equivalents (Note 1) 38,000 Accounts receivable 356,000 299,000 57.000 Prepaid insurance 17.700 34,600 (16.900) Inventory 411,000 367,100 43.900 13.000 17,000 (4,000) 421.000 412,000 9,000 Supplies Long-term investment, at equity (Note 7) , 7) Land (Note 6) Buildings (Note 3) ) Accumulated depreciation-buildings 632.000 516,000 116.000 1.310,000 1,280,000 30.000 (400,000) ) (360,000) (40,000) Equipment (Note 4) 629.000 637,400 (8,400) Accumulated depreciation-equipment (135,000) (25,000) ( (160,000) 100.000 Patent 100,000 -0- Accumulated amortization (40,000) (35,000) (5,000) $3,369.700 $3,229,600 $140,100 Bank overdrafts (temporary) $0 $86,500 $(86,500) Accounts payable 167.000 158,000 9,000 Income tax payable 26,000 35,000 (9.000) Accrued liabilities 55,000 41,000 14,000 Dividends payable 22.000 51,000 (29.000) Long-term notes payable 420,000 460,000 (40,000) 999,000 995,000 4,000 Bonds payable Preferred shares (Note 2) (2 486.000 380,000 106,000 Common shares 743,000 676,000 67,000 Retained earnings 104,600 451,700 $3,369,700 347,100 $3.229.600 $140,100 Income Statement Revenues Sales revenue $1,005,000 Investment income 90,000 $1,095,000 Expenses and Losses Cost of goods sold 315.000 110,000 Sales commissions expense Operating expenses (Note 5) ) Salaries and wages expense 166.000 101,000 Interest expense 97,000 Loss on disposal of equipment (Note 4) 11,000 Income tax expense 96,000 896,000 Net Income $199,000 The following is additional information about Skysong's transactions during the year ended December 31, 2020. 1. The cash equivalents are typically term deposits that are very liquid and mature on average in 60 days. The bank overdrafts are temporary and reverse within a few days. Skysong has opted to show these as cash and cash equivalents on its statement of cash flows. 2. During the year, preferred shares with a carrying amount of $18,000 were converted to common shares. 3. There were no disposals of buildings during the year 2020. 4. Equipment with an original cost of $46,000 and carrying amount of $14,000 was sold at a loss during the year. 5. All depreciation and amortization expense is included in operating expenses. During the year, Skysong obtained land with a fair value of $100,000 in exchange for its preferred shares. 6. 7. Investment income includes the equity earnings of $62,000 from a long-term investment accounted for using the equity method and from interest revenue on the short-term investments referred to in note 1 above. Your answer is partially correct. Prepare the statement of cash flows for the year ended December 31, 2020, for Skysong Inc. using the indirect method. Prepare any additional disclosure notes that are required, including a table that shows the details of the cash and cash equivalents accounts at the end of each period. (Show amounts that decrease cash flow with either a-signeg-15.000 or in parenthesis eg. (15,000L Do not leave any answer field blank Enter for amounts) Skysong Inc. Statement of Cash Flows (Indirect Method) For the year ended December 31, 2020 Cash Flows from Operatinz Activities Net Income /(Loss) V 199000 Increase in Inventory 199000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Expense-Equipment 166000 Loss on Sale of Equipment V 11000 Gainon Sale of Equipment V 22000 Increase in Accounts Receivable V -57000 Decrease in Prepaid Insurance V 16900 Increase in inventory V -43900 Decrease in Supplies 4000 Decrease in Accounts Payable V Increase in Accounts Payable 9000 Decrease in income Tax Payable V -9000 Increase in Accrued Liabilities V 14000 Interest Pald V Net Income / Loss -945000 -945000 Cash Flows from Investing Activities 1045000 Cash Flows from Investing Activities 2000 Proceeds from Issuance of Preferred Shares Purchase of Building -300000 Decrease in Supplies -10500 Purchase of Equipment -37600 Net Cash Used by investing Activities -75100 Cash Flows from Financine Activities Dividends Paid V -58900 Decrease in Supplies -40000 Proceeds from Issuance of Common Shares 4000 49000 Depreciation Expense - Buildings Net Cash Used by Financing Activities -45900 Increase in Cash and Cash Equivalents -16500 Cash and Cash Ecuivalents Balance Dec 31, 2019 96500 Cashand Cash Enuivalents Balance Dec.31. 2020 30000 Non-cash investing and financing activities Sale of Land Additional disclosures Decrease in Suolles Purchase of Equipment Cash and Cash Equivalents 2020 2019 Recayment of Long-term Notes Princial 199000 $ 19900C Temporary Bank Overdrafts 11000 1100C Temporary Bank Overdrafts 30000 1100C 80000