Condensed financial information for Entity A is presented below. Entity A Comparative Balance Sheets December 31, 2018 Assets 2018 2017 Cash 80,800 48,400 Accounts receivable 87,800 38,000 Inventory 112,500 102,850 Prepaid expenses 28,400 26,000 Long-term investments 138,000 109,000 Plant assets 285,000 242,500 Accumulated depreciation -50,000 -52,000 Total 682,500 514,750 Liabilities and Stockholders' Equity Accounts payable 102,000 67,300 Accrued expenses payable 16,500 21,000 Bonds payable 110,000 146,000 Common stock 220,000 175,000 Retained earnings 234,000 105,450 Total 682,500 514,750 Entity A Income Statement For the year ending December 31, 2018 Sales revenue 388,460 Less: Cost of goods sold 135,460 Operating expenses 12,410 Depreciation expense 46,500 Income tax expense 27,280 Interest expense 4,730 Loss on disposal of plant assets 7,500 233,880 Net income 154,580 In addition: 1.Accounts payable pertain to merchandise creditors. 2.New plant assets costing $100,000 cash were purchased during the year. 3.Old plant assets costing 57,500 with accumulated depreciation of 48,500 were sold for 1,500 cash during the year. 4.Some of the bonds payable matured and were redeemed at face. 5.A cash dividend of 26,030 was declared and paid during the year. 1.Prepare a statement of cash flows using the direct method. 2.Prepare a reconciliation statement. 3.Which method do you prefer for preparing the operating activities section?Why? Explain.