Guas Inc., a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative balance sheet and income statement for Guas as of May 31, 2012, are as follows:

The following is additional information about transactions during the year ended May 31, 2012, for Guas Inc., which follows IFRS:
1. Plant assets costing $95,000 were purchased by paying $44,000 in cash and issuing 5,000 common shares.
2. The €œother expenses€ relate to prepaid items.
3. In order to supplement its cash, Guas issued 4,000 additional common shares.
4. There were no penalties assessed for the retirement of bonds.
5. Cash dividends of $78,000 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 Guas Inc. for the year ended May 31, 2012, using the direct method. Support the statement with appropriate calculations, and provide all required disclosures.
(c) Using the indirect method, calculate only the net cash flow from operating activities for Guas Inc. for the year ended May 31, 2012.
(d) Does Guas Inc. have a choice in how it classifies dividends paid on the statement of cash flows?

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GUAS INC. Balance Sheet May 31, 2012, and May 31, 2011 2012 2011 Current assets Cash Accounts receivable Merchandise inventory Prepaid expenses Total current assets 250 74,800 188,700 8,800 305,550 20,000 55,600 199,000 7,000 281,600 Plant assets Plant assets Less: Accumulated depreciation Net plant assets 596,500 148,000 448,500 $754,050 501,500 122,000 379,500 $661,100 Total assets Current liabilities $123,000 61,000 24,700 208,700 $115,000 72,000 22,600 Accounts payable Salaries payable Interest payable Total current llabilities 209,600 Long-term debt Bonds payable Total liabilities 75,000 283,700 100,000 309,600 Shareholders' equity Common shares Retained earnings Total shareholders' equity 335,750 134,600 470,350 $754,050 280,000 71,500 351,500 $661,100 Total liabilities and shareholders' equity GUAS INC Income Statement For the Year Ended May 31, 2012 Sales Cost of merchandise sold Gross margin Expenses $1,345,800 814,000 531,800 207,800 66,700 24,800 26,000 325,300 206,500 65,400 $ 141,100 Salary expense Interest expense Other expenses Depreciation expense Total expenses Operating income Income tax expense Net earnings