The comparative statement of financial position of Dropafix Inc. as at June 30, 2017, and a statement
Question:
Additional information:
1. Dropafix follows IFRS. Assume that interest is treated as an operating activity for purposes of the statement of cash flows.
2. Operating expenses include $10,000 in depreciation expense.
3. There were no disposals of equipment during the year.
4. Common shares were issued for cash.
5. During the year, Dropafix acquired $8,000 of equipment in exchange for long-term notes payable.
Instructions
(a) Prepare the statement of cash flows for Dropafix for the year ended June 30, 2014, using the indirect method along with any necessary note disclosure.
(b) From the perspective of a creditor holding several of the long-term notes in substantial amounts owed by Dropafix, how do you view the cash management demonstrated by Dropafix?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119048534
11th Canadian edition Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy