Financial statements for Wonder Company follow:

Additional information:

a. The company sold equipment that had an original cost of $ 292,000 and a net book value of $ 123,800. Other equipment was purchased for cash. Patent amortization was $ 4,000.

b. Long- term debt with a face value of $ 400,000 was repaid during the year and other long-term debt was issued at a lower interest rate.

c. The company issued shares for land during the period. Other common shares were retired (bought back and cancelled) at book value.

d. Assume unexplained changes in accounts stem from logical transactions.

Required:

1. Prepare the SCF, using the indirect method. Use the two- step method for operations. Omit the separate disclosure of cash flows for interest, investment income, and income tax.

2. Prepare the SCF, using the direct method to present cash flows in the operating activities section.

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WONDER COMPANY Statement of Financial Position As of 31 December 20X4 20X3 Assets Current assets: Cash Accounts receivable Inventory $ 18,500 515,000 420,000 953,500 350,000 1,760,000 (890,800) 93,000 $2,265,700 $ 16,000 490,000 380,800 886,800 150,000 1,209,000 (878,000) 97,000 $1,464,800 Total current assets Land Plant and equipment Less: Accumulated depreciation Patents Total assets Liabilities and shareholders' equity Liabilities: Current liabilities: Accounts payable Salaries and wages payable Income tax payable $ 290,000 45,700 106,900 442,600 1,109,000 1,551,600 $ 316,200 42,100 99,300 457,600 595,000 Total current liabilities Long-term debt Total liabilities 1,052,600 Shareholders' equity: 183,000 531,100 714,100 $2,265,700 Common shares, no-par Retained earnings 180,000 232,200 412,200 $1,464,800 Total shareholders' equity Total liabilities and shareholders' equity WONDER COMPANY Statement of Comprehensive Income For the year ended 31 December 20X4 $3,700,000 Sales revenue Less expenses: Cost of goods sold Selling and administrative expenses Depreciation and amortization Rent expense $2,041,000 545,000 185,000 15,000 142,000 Miscellaneous expenses Total expenses Other revenues and expenses: Interest expense Gain on sale of equipment Loss on debt retirement 2,928,000 34,600 (6,000) 11,000 Earnings before income tax Income tax expense Net earnings and comprehensive income 39,600 732,400 311,800 $ 420,600 CourseSmart