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 statement of financial position and income statement for Guas as at May 31, 2017 are as follows:

The following is additional information about transactions during the year ended May 31, 2017 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 "other 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 repayment of mortgage.
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, 2017, 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, 2017.
(d) Does Guas Inc. have a choice in how it classifies dividends paid on the statement of cash flows?
(e) Assume that you are a shareholder of Guas Inc. What do you think of the dividend payout ratio that is highlighted in the statement of cash flows?

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GUAS ING Statement of Financial Position As at May 31 2017 2016 Current assets Cash Accounts receivable Inventory Prepaid expenses $ 33,250 74,800 188,700 $20,000 55,600 199,000 7,000 281,600 501,500 122,000 379,500 $661,100 8,800 Total current assets Plant assets Less: Accumulated depreciation Net plant assets 305,550 596,500 48,000 448,500 $754,050 Total assets Current labilities Accounts payable Salaries and wages payable Interest payable $123,000 61,000 24,700 208,700 75,000 283,700 $115,000 72,000 22,600 209,600 100,000 309,600 Total current liabilities Mortgage payable Total liabilities Shareholders' equity Common shares Retained earnings 335,750 134,600 470,350 $754,050 80,000 71500 351,500 $661,100 Total shareholders' equity Total liabilities and shareholders' equity GUAS INC. Income Statement For the Year Ended May 31, 2017 Sales Cost of goods sold Gross margin Expenses Salaries and wages expense Interest expense Other operating expenses Depreciation expense Total operating expenses Operating income Income tax expense Net earnings $1,345,800 814,000 531,800 207,800 66,700 24,800 26,000 325,300 206,500 65,400 $ 141,100