Required (a) Prepare the operating activities section of the statement of cash flows using the direct method. (b) Prepare the operating activities section of the statement of cash flows using the indirect method, ie. prepare a reconciliation of profit to cash provided by operations PSA11.4 These are the financial statements of O'Reilly Ltd eet cast and indivect d calculate O'REILLY LTD Statement of Financial Position as at 31 December 2012 2012 2011 $ 15000 14000 35 000 78000 $ 29 000 Asscts Cash 28000 Accounts receivable Inventory Property, plant and equipment Accumulated depreciation 25 000 60 000 (24000) $118 000 (20000) $122 000 Total Liabilities and equity Accounts payable Dividends payable Income tax payable Debentures payable Share capital Retained earnings $ 26000 $ 25 000 3000 5000 27000 18 000 43 000 8 000 33000 14000 38 000 $122 000 $118 000 Total O'REILLY LTD Income Statement for the year ended 31 December 2012 Sales Cost of sales $250000 210000 40000 18000 6000 2000 14000 4000 Gross profit Selling expenses Administrative expenses Interest expense Profit before income tax Income tax expense Profit $ 10000 The following additional data were provided: 1. The entity paid an interim dividend of $2000 and declared a final dividend. 2. During the year equipment was sold for $8500 cash. This equipment cost $18000 originally and had a carrying amount of $8500 at the time of sale. 3. All depreciation expense is in the selling expense category 4. All operating expenses except for depreciation were paid in cash. Required a) Prepare a statement of cash flows using the direct method. b) Reconcile profit to cash provided by operating activities -) Calculate these cash-basis measures: 1. current cash debt coverage 2. cash return on sales ratio 3. cash debt coverage. Comment on the cash adequacy as indicated by the ratios calculated in part (c) skills-4th edition