Intermediate Financial Reporting 1 Practice Problem 2 (30 minutes) Stanger Ltd.'s financial statements for the current year ended December 31, Year 2. are as follows: Stanger Ltd. Statement of financial position As at December 31 Cash Investments at fair value through profit or loss (FVPL) Accounts receivable (net) Inventory Land Equipment Less: Accumulated depreciation Trademark (net) Year 2 $ 91,000 11,000 406,000 501.000 365,000 1.645,000 (412,000) 140.000 $ 2.747.000 $ 457,000 25,000 93,000 608,000 329,000 400,000 835.000 $ 2.747.000 Year 1 $ 85,000 13,000 374.000 522,000 212,000 1,344,000 (389,000) 162.000 $ 2.323.000 $ 460,000 75.000 Accounts payable Income taxes payable Note payable Bonds payable Common shares Preferred shares Retained earnings 625,000 239,000 380,000 544.000 $ 2.323.000 Stanger Ltd. Statement of comprehensive income For the year ended December 31, Year 2 Sales Cost of goods sold Gross profit Depreciation of equipment Interest expense Other expenses Operating income Impairment loss trademark Income before income taxes Income tax expense Net income $ 4,859,595 3.002.145 1,857,450 318,700 40,500 735 750 762,500 40.000 722,500 293.000 $429.500 Additional information: Stanger has adopted an accounting policy of classifying cash inflows from interest and dividends as operating activities and cash outflows for interest and divideridas financing activities. Stanger did not buy or sell any investments at FVPL during the year. The reported change in value is due to a decrease in the market value of the investment The company nets many items to other expenses --for example, salaries, gains and losses on fixed asset sales, and holding gains and losses in investments at FVPL During fiscal Year 2. Stanger issued a $100.000 note payable to a vendor in exchange for equipment with a fair value of $100,000. The interest rate on the note reflected the market rate for liabilities of this nature. $90,000 of common shares and $20,000 of preferred shares were issued by Stanger to acquire $110,000 of equipment. Stanger successfully defended its right to a trademark. Related legal costs totalled $18,000. The decrease in the bonds payable account was due to a principal payment made in the year Stanger sold equipment originally costing $420,000 for $75,000. Required: . . . a) Prepare a statement of cash flows for Stanger for the year ended December 31, Year 2. For the operating activities section, use the indirect method. Assume that the company follows IFRS for reporting purposes. b) Identify what supplemental note disclosure, if any, is required. c) Prepare the operating activities section of the statement of cash flows for Stanger for the year ended December 31, Year 2, using the direct method. (Combine cash paid to suppliers and employees.)