Zippo’s financial statements as at December 31, 2021, appear below:

Additional information: 

■ Property, plant, and equipment costing $570,000 was sold for $422,000. 

■ 100,000 ordinary shares were issued to acquire $450,000 of property, plant, and equipment. 

■ $212,000 of deferred development costs were capitalized during the year. 

■ The company nets many items to “Other Expenses,” for example, gains and losses on fixed asset sales and some amortization. 

■ Bad debt expense for the year was $8,000. 

■ The deferred product development expenditures were all paid in cash. 

■ The decrease in the bonds payable account was due to the amortization of the premium. 

■ Zippo has adopted a policy of classifying cash outflows from interest and dividends as financing activities. 

Required:

a. Prepare a statement of cash flows for Zippo Ltd. for 2021 using the indirect method. 

b. Identify what supplemental disclosure, if any, is required 

c. Based on your analysis of Zippo’s cash flow activities during the year, do you think that you should consider investing in the company? Why or why not?

Cash Investments held to meet short-term cash commitments Accounts receivable Less allowance for bad debts and doubtful accounts Inventory Property, plant, and equipment Less accumulated depreciation Zippo Ltd. Comparative Balance Sheet As at December 31 Intangibles, net Deferred product development costs Accounts payable Income taxes payable Bonds payable Ordinary shares Retained earnings 2021 $ 160,000 12,000 300,000 (10,000) 575,000 1,984,000 (650,400) 126,000 564,000 3,060,600 81,000 12,000 659,500 1,150,000 1,158,100 $3,060,600 2020 $ 100,000 10,000 375,000 (15,000) 498,000 1,396,000 (487,000) 135,000 417,000 2,429,000 84,000 2,000 674,000 700,000 969,000 $2,429,000