Marchant Ltd. reported the following abbreviated statement of financial position and statement of income for 2020.

Required

a. Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2020, using the indirect method.

b. Determine the cash flows from operating activities using the direct method.

c. Was the cash flow generated by the company’s operating activities during the year larger or smaller than the net income? Should these two amounts be the same? Explain.

d. Was the change in the amount of working capital during the year the same amount as cash from operating activities? Should these two amounts be the same? Explain.

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MARCHANT LTD. Comparative Statement of Financial Position Dec. 31, 2020 Dec. 31, 2019 $ 60,000 $ 70,000 Cash Accounts receivable 120,000 140,000 Inventory 320,000 280,000 Property, plant, and equipment 650,000 700,000 Less: Accumulated depreciation (260,000) (230,000) Total assets $940,000 $910,000 $ 82,000 $ 85,000 Accounts payable Wages payable 8,000 10,000 400,000 Loan payable 350,000 Common shares 200,000 150,000 Retained earnings 300,000 265,000 Total liabilities and shareholders' equity $940,000 $ 910,000 MARCHANT LTD. Statement of Income For the year ended December 31, 2020 Sales revenue $450,000 Cost of goods sold 240,000 Gross profit 210,000 Other expenses: $ 15,000 Supplies expense Depreciation ex pense 30,000 Wages expense 100,000 5,000 Other operating ex penses 24,000 Interest expense 174,000 36,000 Other income 8,000 $ 44,000 Net income