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.