Question

Application Problem 5-10A al (Indirect Method) Digiread Technologies Ltd. (DTL) is a privately held distributor of e-readers and tablets. The Calgary-based company is well established and is currently managed by its founder, Erin Jacobs. The company's financial statements are presented below, together with some additional information. DIGIREAD TECHNOLOGIES LTD. Statement of Income For the Year Ended December 31, 2020 Sales revenue $61,610,000 Cost of goods sold 41.968,000 Gross profit 19,642,000 Wages expense 4,880,000 Depreciation expense 1,464,000 Interest expense 2,318,000 Income tax expense 1,952,000 Gain on sale of equipment (732,000) Net income $9,760,000 DIGIREAD TECHNOLOGIES LTD. Statement of Financial Position As at December 31 2020 2019 Assets Current assets: Cash $18,910,000 $10,370,000 Accounts receivable (net) 14,030,000 18,910,000 Inventory 20,618,000 23,180,000 Total current assets 53,558,000 52,450,000 Equipment 48,068,000 36,600,000 Accumulated depreciation, equipment (8,052,000) (7,808,000) Total Assets $93,574,000 $81,252,000 Liabilities and shareholders' equity Current liabilities: Accounts payable $14,518,000 $8,540,000 Wages payable 1,464,000 1,220,000 Total current liabilities 15,982,000 9,750,000 Bonds payable 25,620,000 31,720,000 Common shares 17,080,000 10,980,000 Retained earnings 34,892,000 28,792,000 Total liabilities and shareholders' equity 593,574,000 $81,252,000 DIGIREAD TECHNOLOGIES LTD. Other Selected Financial Information for the Year Ended December 31, 2020 1. Total sales in 2020 were consistent with the prior year's, and the company's dividend policy has remained consistent for the past five years. 2. During 2020, DTL sold a piece of equipment for $2,562,000. The equipment had originally cost $3,050,000 and had a net carrying amount of $1,830,000 at the time of sale. 3. On August 1, 2020, DTL's board of directors approved the retirement of bonds with a carrying amount $6,100,000 through the issuance of common shares.

Answer 1

Answer-

DIGIREAD TECHNOLOGIES INC.
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,2020
Particulars		Amount
		$
Cash flow from operating activities
Net Income		9760000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		1464000
Gain on sale of equipment		-732000
Change in operating assets & liabilities
Decrease in accounts receivable		4880000
Decrease in inventory		2562000
Increase in accounts payable		5978000
Increase in wages payable		244000
Net cash flow from operating activities (a)		24156000
Cash Flow from Investing activities
New equipment purchased		-14518000
Equipment sold		2562000
Net cash Flow from Investing activities (b)		-11956000
Cash Flow from Financing activities
Cash dividends paid	($28792000+9760000-34892000)	-3660000
Net cash Flow from Financing activities (c)		-3660000
Net Change in cash c=a+b+c		8540000
Beginning cash balance		10370000
Closing cash balance		18910000
Schedule of non cash investing & financing activities
Issuance of common shares for retirement of bonds		6100000

Cash paid for interest = $2318000.

Cash paid for income tax expense = $1952000