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Problem 5-11 b (Essay) A comparative statement of financial position for Spencer Corporation follows: SPENCER CORPORATION Statement of Financial Position December 31 Assets 2020 2019 Cash $65,000 $ 29,000 Accounts receivable 87,000 59,000 Inventory 133,000 81,000 FV-OCI Investments in shares 63,000 84,000 Land 65,000 103,000 Equipment 390,000 430,000 Accumulated depreciation-equipment (117,000) (86,000) Goodwill 124,000 173,000 $810,000 $873,000 Liabilities and Shareholders' Equity Accounts payable $ 12,000 $ 51,000 Dividends payable 15,000 32,000 Notes payable 220,000 335,000 Common shares 265,000 125,000 Retained earnings 288,000 284,000 Accumulated other comprehensive income 10,000 46,000 Total $810,000 $873,000 Total Additional information: 1 2. Net income for the fiscal year ending December 31, 2020, was $19,000. In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $86,000 was sold for proceeds of $95,000. 3. In April 2020, notes payable amounting to $140,000 were retired through the issuance of common shares. In December 2020, notes payable amounting to $25,000 were issued for cash. 4. FV-OCI investments were purchased in July 2020 for a cost of $15,000. By December 31, 2020, the fair value of Spencer's portfolio of FV-OCI investments decreased to $63,000. No FV-OCI investments were sold in the year. 5. On December 31, 2020, equipment with an original cost of $40,000 and accumulated depreciation to date of $12,000 was sold for proceeds of $21,000. No equipment was purchased in the year. 6. Dividends on common shares of $32,000 and $15,000 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities. 7. A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year. During the year, Spencer retired $140,000 in notes payable by issuing common shares. During the year, Spencer retired $140,000 in notes payable by issuing common shares. $19,000 Spencer Corporation Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $43,000 Loss on disposal of equipment 7,000 Gain on disposal of land (9,000) Loss on impairment 49,000 Increase in accounts receivable (28,000) Increase in inventory (52,000) Decrease in accounts payable (39,000) Net cash used by operating activities Cash flows from investing activities Purchase of Fair Value-OCI investments (15,000) Proceeds from sale of equipment 21,000 Purchase of land (48,000) Proceeds from sale of land 95,000 Net cash provided by investing activities Cash flows used by financing activities Payment of cash dividends (32,000) Issuance of notes payable 25,000 Net cash used by financing activities Net increase in cash Cash at beginning of year Cash at end of year (29,000) (10,000) 53,000 (7,000) 36,000 29,000 $65,000 (b) From the perspective of a shareholder, comment in general on the results reported in the statement of cash flows. LINK TO TEXT LINK TO TEXT

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