3 Reporting and analysing cash and cash flow statement (20 Marks) Application of direct method and indirect method for reporting cashflows (10 Marks) Blue Mountain Ltd reported the following in its financial statements for the year ended 2022. Income statement 2022 ($) 2021 ($) Net sales 60,000 52,000 Cost of sales 38,000 36,000 Other operating expenses 800 1,000 Income tax 2,000 2,400 Profit 9,200 12,600 Balance sheet Cash 2,800 2,400 Account receivable 1,200 1,400 Inventory 5,600 6,400 Property, plant and equipment, net 7,000 9,000 Account payable 3,000 3,200 Non-current liabilities 900 880 Ordinary share capital 1,000 1,200 Retained earnings 11,700 13,920 Required 3.1 a. Use the direct method to account for the cashflows from the operating activities (8 Marks) b. Use the indirect method to reconcile the cashflows from the operating activities (8 Marks) 3.2 What would an investor look at if they want to know how much cash Coles and Woolworths can free up for new opportunities, such as expanding into a new sales region? Explain (4 Marks)