Sable Island Ltd. is a private company reporting under ASPE. Its income statement contained the following condensed information:

Sable Island?s balance sheet contained the following comparative data at December 31:

Additional information: Accounts payable relate to operating expenses.

Instructions

Prepare the operating activities section of the cash fl ow statement using either

(a) The indirect method or

(b) The direct method, as assigned by your instructor.

Taking It Further

What are the advantages and disadvantages of the indirect method of determining cash provided (used) by operating activities?

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SABLE ISLAND LTD. Income Statement Year Ended December 31, 2021 Service revenue $900,000 Operating expenses Depreciation expense Gain on sale of equipment Profit from operations Other expenses Interest expense $642,000 50,000 (23,000) 669,000 231,000 5,000 Profit before income tax 226,000 Income tax expense 56,500 Profit $169,500 2021 2020 Accounts receivable Prepaid expenses Accounts payable Income tax payable Interest payable Unearned revenue $48,000 $56,000 41,000 4,000 1,000 36,000 9,250 550 10,000 13,750