Autonomous Control Ltd. (ACL) is a leading automotive parts manufacturer supplying the large original equipment manufacturers (OEMs). ACL manufactures sensors, electronics, and control technologies that are used by OEMs to make driverless vehicles possible and safe. The London, Ontario-based company has customers across the world, but its largest market is the United States. The company also manufactures traditional auto parts; however, the shift by car manufacturers to more advanced technologies has meant that ACL’s sales declined by 15% over the prior year. The company is hoping that its move into control technologies and the trend to safe driverless vehicles will translate to an increase in sales. In the meantime, the company has been approaching its banks seeking a long-term loan. ACL provided the banks the following financial information:

Additional information:

1. During the year, the company made a principal repayment on the bank loan in the amount of $75,000.

2. Equipment with a net carrying amount of $62,000 was sold during the year.

3. No equipment was purchased during the year.

Required

a. You work for one of the banks in the lending group and have been tasked with preparing the statement of cash flows for ACL using either the direct or indirect method for determining cash flows from operating activities. Prepare the statement.

b. Discuss significant observations from the statement of cash flows that your bank would want to consider.

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AUTONOMOUS CONTROL LTD. Statement of Financial Position As at September 30 2020 2019 Assets Current assets: $ 20,000 Cash Accounts receivable (net) 450,000 500,000 Iventory 692,000 600,000 Total current assets 1,142,000 1,120,000 Equipment 1,400,000 1,700,000 Accumulated depreciation, equipment (1,282,000) (1,350,000) Total assets $1,260,000 $1,470,000 Liabilities and shareholders' equity Current liabilities: $ 10,000 Bank indebtedness 230,000 Accounts payable 300,000 Total current liabilities 240,000 300,000 395,000 Bank loan payable 470,000 Common shares 400,000 400,000 Retained earnings Total liabilities and shareholders' equity 225,000 300,000 $1,260,000 $1,470,000 AUTONOMOUS CONTROL LTD. Statement of Income For the year ended September 30, 2020 Sales revenue $8,350,000 Cost of goods sold 7,450,000 Gross profit Wages expense 900,000 245,000 276,000 Utilities ex pense Depreciation ex pense 170,000 Rent expense 200,000 30,000 Interest ex pense (21,000) Loss from operations Gain on sale of equipment 35,000 Earnings before income tax 14,000 Income tax expense 5,000 Net income 9,000