HTM Limited is a young and growing producer of electronic measurement instruments and technical equipment. You have been retained by HTM to advise it in preparing a statement of cash flows using the indirect method. For the fiscal year ended October 31, 2011, you have obtained the following information about certain HTM events and transactions. The company reports under IFRS.
1. Earnings reported for the fiscal year were $800,000.
2. Depreciation expense of $315,000 was included in the earnings reported.
3. Uncollectible accounts receivable of $40,000 were written off against the allowance for doubtful accounts. Also,
$51,000 of bad debt expense was included in determining income for the year and was added to the allowance for doubtful accounts.
4. A gain of $9,000 was realized on the sale of a machine; it originally cost $75,000, of which $30,000 was depreciated to the date of sale.
5. The company has investments that are recorded at FV through OCI. The increase in the value of these investments that was included in other comprehensive income for the year was $30,000.
6. The company has an investment property, which is measured at fair value. At October 31, 2011, it was determined that the fair value of the building had declined by $45,000 and the appropriate adjustment was made.
7. On July 3, 2011, equipment was purchased for $700,000; HTM gave in exchange a payment of $75,000 cash, previously unissued common shares with a $200,000 market value, and a $425,000 mortgage note payable for the remain der.
8. On August 3, 2011, $800,000 in face value of HTM's 10% convertible debentures were converted into common shares. The bonds were originally issued at face value.
9. Bonds payable with a par value of $100,000, on which there was an unamortized bond discount of $2,000, were redeemed at 99.5.
10. On September 21, 2011, a new issue of $500,000 par value, 8% convertible bonds was issued at 101. Without the conversion feature, the bonds would have been issued at 99.
11. HTM's employees accrue benefits related to the company's unfunded post-retirement medical plan each year. At October 31, 2011, HTM recognized $49,000 of accrued expense for the current year.
(a) Explain whether each of the 11 numbered items is a source of cash, a use of cash, or neither.
(b) Explain how each item that is a source or use of cash should be reported in HTM's statement of cash flows for the fiscal year ended October 31, 2011, assuming HTM uses the indirect approach for the Operating Activities section. For items that are neither a source nor use of cash, explain why this is true, and indicate the disclosure, if any, that should be made of the item in the company's statement of cash flows for the year ended October 31, 2011.

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