The statement of profit or loss of Phillips Screwdrivers Ltd is presented here. 

Additional information:

1. Accounts receivable decreased $300 000 during the year.

2. Prepaid expenses increased $150 000 during the year.

3. Accounts payable to suppliers of inventory decreased $300 000 during the year.

4. Accrued expenses payable decreased $100 000 during the year. 

5. Administrative expenses include depreciation expense of $60 000.

6. All tax expense was paid in cash.

Required

(a) Prepare the operating activities section of the statement of cash flows for the year ended 31 March 2017 for Phillips Screwdrivers Ltd, using the direct method.

(b) Reconcile profit to cash provided by operations for the year ended 31 March 2017.

(c) The statement of cash flows classifies cash receipts and cash payments into operating, investing and financing activities. Discuss why operating activities is the most important category of the three?

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Sales Cost of sales Beginning inventory Purchases PHILLIPS SCREWDRIVERS LTD Statement of profit or loss for the year ended 31 March 2017 Goods available for sale Ending inventory Total cost of sales Gross profit Operating expenses Selling expenses Administrative expenses Profit before tax Tax expense Profit $ 1900 000 4 400 000 6 300 000 1600 000 450 000 600 000 $6900 000 4700 000 2 200 000 1050 000 1150 000 100 000 $1050 000