Sheffield  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 statement of financial position and income statement for Sheffield as at May 31, 2018 are as follows:

Sheffield Inc.
Statement of Financial Position
As at May 31
	2018	2017
Current assets
Cash	$ 33,250	$ 20,000
Accounts receivable	74,800	55,600
Inventory	188,700	199,000
Prepaid expenses	8,800	7,000
Total current assets	305,550	281,600
Plant assets	596,500	501,500
Less: Accumulated depreciation	148,000	122,000
Net plant assets	448,500	379,500
Total assets	$754,050	$661,100
Current liabilities
Accounts payable	$123,000	$115,000
Salaries and wages payable	61,000	72,000
Interest payable	24,700	22,600
Total current liabilities	208,700	209,600
Mortgage payable	75,000	100,000
Total liabilities	283,700	309,600
Shareholders’ equity
Common shares	335,750	280,000
Retained earnings	134,600	71,500
Total shareholders’ equity	470,350	351,500
Total liabilities and shareholders’ equity	$754,050	$661,100

Sheffield Inc.
Income Statement
For the Year Ended May 31, 201	8
Sales	$1,345,800
Cost of goods sold	814,000
Gross margin	531,800
Expenses
Salaries and wages expense	207,800
Interest expense	66,700
Other operating expenses	24,800
Depreciation expense	26,000
Total operating expenses	325,300
Operating income	206,500
Income tax expense	65,400
Net earnings	$141,100

The following is additional information about transactions during the year ended May 31, 2018 for Sheffield Inc., which follows IFRS:

a. Plant assets costing $95,000 were purchased by paying $44,000 in cash and issuing 5,000 common shares.

b. The “other expenses” relate to prepaid items.

c. In order to supplement its cash, Sheffield issued 4,000 additional common shares.

d. There were no penalties assessed for the repayment of mortgage.

e. Cash dividends of $78,000 were declared and paid at the end of the fiscal year.

Required:

1. Prepare a statement of cash flows for Sheffield Inc. for the year ended May 31, 2018, using the direct method. Support the statement with appropriate calculations, and provide all required disclosures.

2. Using the indirect method, calculate only the net cash flow from operating activities for Sheffield for the year ended May 31, 2018.

3. Assume that you are a shareholder of Sheffield Inc. What do you think of the dividend payout ratio that is highlighted in the statement of cash flows?