Financial information for Solnickova Inc. follows:

Additional information:

• Preferred shares were converted to common shares during the year at their book value.
• The face value of the bonds is $400,000; they pay a coupon rate of 5% per annum. The effective interest rate of interest is 6% per annum.
• Net income was $80,000.
• There was an ordinary stock dividend valued at $4,000 and cash dividends were also paid.
• Interest expense for the year was $125,000. Income tax expense was $20,000.
• Solnickova arranged for a $250,000 bank loan to finance the purchase of the held-to-maturity investments.
• Solnickova has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities, respectively.
• The at fair value through profit or loss investments are not cash equivalents.

Required:
a. Prepare a statement of cash flows for the year ended December 31, 2014, using the indirect method.
b. Discuss how the transaction(s) above that are not reported on the statement of cash flows are reported in the financial statements
c. Independent of part (a), assume that Solnickova designates the at fair value through profit or loss investment as a cash equivalent. Summarize the impact of this change on the company€™s statement of cash flows for the year ended December 31, 2014.

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Solnickova Inc. Balance Sheets As at December 31, 2013 and 2014 2013 2014 Assets $ 150,000 $ 500,000 Cash Accounts receivable 1,400,000 1,500,000 Inventory 600,000 400,000 Investments-at fair value through profit or loss 100,000 Investments-financial asset at amortized cost 200,000 Property, plant, and equipment 3,250,000 3,250,000 Accumulated depreciation (1,950,000) (1,700,000) $ 3,950,000 $ 3,750,000 Total Liabilities and shareholders' equity $ 320,000 $ 100,000 Accounts payable Bank loans 1,967,200 2,550,000 Bonds payable 382,800 380,000 Preferred shares 10,000 Ordinary shares 600,000 500,000 Retained earnings 480,000 410,000 $ 3,750,000 $ 3,950,000 Total