(SCF-Direct and Indirect Methods from Comparative Financial Statements) George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.

The following is additional information concerning Winston’s transactions during the year ended May 31, 2008.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.
The “other expenses” are related to prepaid items.
All income taxes incurred during the year were paid during the year.
In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.
There were no penalties assessed for the retirement of bonds.
SUOUSS SICSaENs h dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions

(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.

(b) Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)

(c) Using the indirect method, calculate only the net cash flow from operating activities for Winston Company for the year ended May 31, 2008.

GEORGE WINSTON COMPANY COMPARATIVE STATEMENT OF FINANCIAL POSITION AS OF MAY 31 2008 2007 Current assets Cash Accounts receivable Merchandise inventory $ 33,250 80,000 210,000 $ 20,000 58,000 250,000 Prepaid expenses 9,000 7,000 Total current assets 332,250 335,000 Plant assets Plant assets 600,000 502,000 Less: Accumulated depreciation 150,000 125,000 Net plant assets 450,000 377,000 Total assets $782,250 $712,000 Current liabilities Accounts payable $123,000 $115,000 Salaries payable 47,250 72,000 Interest payable 27,000 25,000 Total current liabilities 197,250 212,000 Long-term debt Bonds payable 70,000 100,000 Total liabilities 267,250 312,000