Financial Information for Fesone Inc Additional Information:
1

Financial information for Fesone Inc.'s balance sheet for fiscal 2013 and 2014 follows:
$\begin{array}{lll}&2014&2013\\\text { Cash } & 204,800 & 550,000 \\\text { Accounts receivable } & 1,150,000 & 1,300,000 \\\text { Inventory } & 410,000 & 250,000 \\\text { Investments - held for trading } & 400,000 & \\\text { Investments - held to maturity } & 150,000 & \\\text { Property plant and equipment } & 3,400,000 & 3,400,000 \\\text { Accumulated depreciation } & (1,860,000) & (1,570,000 \\\text { Total } & \underline{3,854,800} & \underline{3 , 9 3 0 , 0 0 0}\end{array}$
$\begin{array}{lll}\text { Accounts payable } & 260,000 & 80,000 \\\text { Bank loan } & 2,226,000 & 2,850,000 \\\text { Bonds payable } & 187,800 & 185,000 \\\text { Preferred shares } & 0 & 15,000 \\\text { Common shares } & 597,000 & 450,000 \\\text { Retained earnings } & 584,000 & 350,000 \\\text { Total } & \mathbf{3 , 8 5 4 , 8 0 0} & \mathbf{3 , 9 3 0 , 0 0 0}\end{array}$
Additional information:
1. Preferred shares were converted to common shares during the year at their book value.
2. The face value of the bonds is $200,000; they pay a coupon rate of 6% per annum. The effective interest rate of interest is 8% per annum.
3. Net income was $290,000.
4. There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid.
5. Interest expense for the year was $130,000. Income tax expense was $116,000.
6. Fesone arranged for a $200,000 bank loan to finance the purchase of the held-to-maturity investments.
7. Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8. The held-for-trading investments are not cash equivalents.
9. Sales = 1,600,000; cost of goods sold = 600,000; and,sales and administration expenses = 525,000
Requirements:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b. Compare and contrast the cash flows from operating activities prepared under the indirect method versus the direct method. Which statement do you feel provides investors and other users of the financial statements with more useful information? Why?