Edwards, Inc. has prepared the following comparative balance sheets

     for 2003 and 2004:

                                                    2004         2003

                                                —————   ————

         Cash                                    $  198,000    $102,000

         Receivables                                 106,000      78,000

         Inventory                                   100,000     120,000

         Prepaid expenses                             12,000      18,000

         Plant assets                                 840,000     700,000

         Accumulated depreciation                    (300,000)    (250,000)

         Patent                                     102,000     116,000

                                             ———————  —————

                                                 $1,058,000    $884,000

         Accounts payable                        $  102,000    $112,000

         Accrued liabilities                           40,000      28,000

         Mortgage payable                           ———     300,000

         Preferred stock                            350,000     ———

         Additional paid-in capital——preferred         80,000     ———

         Common stock                            400,000     400,000

         Retained earnings                           86,000      44,000

                                            ———————  —————

                                                 $1,058,000   $884,000

     1. The Accumulated Depreciation account has been credited only for

        the depreciation expense for the period.

     2. The Retained Earnings account has been charged for dividends of

        $92,000 and credited for the net income for the year.

        The income statement for 2004 is as follows:

                   Sales                   $1,320,000

                   Cost of sales              726,000

                                           ——————

                   Gross profit               594,000

                   Operating expenses         460,000

                                           ——————

                   Net income              $  134,000

INSTRUCTIONS

     (a) From the information above, prepare a statement of cash flows

         (indirect method) for Edwards, Inc. for the year ended

         December 31, 2004.

     (b) From the information above, prepare a schedule of cash provided

         by operating activities using the direct method.