PSA11.5 The condensed financial data of Freshest Farmers Ltd follow.

FRESHEST FARMERS LTD Statement of financial position as at 31 March 2016

	2016	2015
Assets
Cash	$147 000	$57 600
Accounts receivable	136 200	49 500
Inventories	168 750	154 275
Prepaid expenses	27 600	24 000
Investments	162 000	141 000
Plant and machinery	405 000	363 750
Accumulated depreciation	(75 000)	(78 000))
Total	$971 550	$712 125
Liabilities and equity
Accounts payable	$138 000	$100 950
Accrued expenses payable	25 050	25 500
Debentures payable	127 500	150 000
Share capital	330 000	277 500
Retained earnings	351 000	158 175
Total	$971 550	$712 125

FRESHEST FARMERS LTD Statement of profit or loss for the year ended 31 March 2016

Sales		$513 000
Less:
Cost of sales	$173 190
Operating expenses, excluding depreciation	18 615
Depreciation expense	69 750
Income tax	10 500
Interest expense	3 345
Loss on sale of machinery	11 250	286 650
Profit		$226 350

Additional information:

New machinery costing $127 500 was purchased for cash during the year.

Old machinery having an original cost of $86 250 was sold for $2250 cash.

Debentures matured and were paid off at face value for cash.

A cash dividend of $33 525 was declared and paid during the year.

Accounts payable pertain to inventory creditors.

Required

1.Prepare a reconciliation of profit and cash from operations. (Note: This is also the indirect method of calculating the operating activities section of the statement of cash flows.)

2.Prepare the operating activities section direct and indirect methods.