Comparative SFP accounts of Jensen Limited, which follows IFRS, appear below:
Additional information:
1. Equipment that cost $10,000 and was 40% depreciated was sold in 2020.
2. Cash dividends were declared and paid during the year.
3. Common shares were issued in exchange for land. No other land was acquired or disposed of during the year. Common shares were also issued for equipment purchases in the amount of $20,000.
4. FV-NI investments that had cost $35,000 and had a fair value of $37,000 at December 31, 2019, were sold during the year for proceeds of $50,000, resulting in a realized gain of $13,000. Jensen also had unrealized gains during the year of $11,000. Additional purchases of FV-NI investments were made during 2020.
5. Cost of goods sold includes $115,000 of direct labour and benefits and $11,700 of pension costs. Operating expenses include $76,000 of salaries and wages and $8,000 of pension expense.
6. Jensen has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities on the statement of cash flows.
7. No accounts receivable were written off during the year.
Instructions
a. Prepare a statement of cash flows using the indirect method, including all required disclosures.
b. Prepare the “Cash provided by (or used in) operating activities” section under the direct method.
c. Does Jensen Limited have any options available for the classification of interest and dividends paid or received?
d. Comment on the company’s cash activities during the year.
e. Assume that you are a shareholder of Jensen Limited. What do you think of the dividend payout ratio that is highlighted in the statement of cash flows?
