Financial statement data for Continental Stores, Inc., are provided. (All numbers are shown rounded to the nearest thousand, with 000’s omitted.)

1. Compute the net cash flows from operations using the direct method. 2. Interpretive Question: Comment on the difference between net income and net cash flows from operations. 3. Prepare a statement of cash flows for Continental Stores, Inc., for the year ended December 31, 2003.

Sales revenue Cost of goods sold Continental Stores, Inc. Income and Retained Earnings Statements For the Year Ended December 31, 2003 Gross margin Operating expenses: Sales and administrative expenses. Depreciation expense... Other expenses Total operating expenses. Income before taxes. Income taxes. Net income Dividends paid Increase in retained earnings $1,290 978 $ 312 $ 105 14 87 $ 206 $ 106 51 $ 55 10 $ 45