This is something that I have experienced from both sides-- losing a loved one, and having a close friend who lost their father fairly young. In general, I feel that it's better to avoid any 'silver lining' types of words like, "he's in a better place now" and "it's all part of God's plan". While grief is still real and raw, it's better to acknowledge how terrible this is for her right here and now. You can say things like, "This is terribly sad", ""He was a good man and will be missed by many people" and "I'm here for you". You can remind her that her sadness is normal, that you care for her in this difficult time, and most of all (assuming that it is true) that you can handle her negative feelings, and aren't scared away by them or too uncomfortable. It is of immense value when going through the hardest times in life to have someone who can accept your overwhelming emotions, empathize/sympathize with them, and yet not be so drawn into them that they also begin to 'drown'.
On that note, make sure that you do what you need to take care of yourself. It's alright to be sad yourself, and cry with your friend sometimes, but if you are having a hard time with the death, find someone more remote from the situation to give you some support, or take time to do things that make you feel happy and well, etc. Don't let yourself falling into a 'mutual support' situation with your friend-- be strong for her when you can be, if you start to falter let someone else support you. There is a helpful concept called "ring theory" that is useful for anyone who is supporting others through a crisis.
You can offer help and support in the form of gifts (a meal, a pretty potted plant, a cozy blanket, a giftcard for favorite food or coffee), physical assistance (shopping, cleaning, errands, help planning the funeral or making hotel arrangements for family who are coming to visit), you can take your friend out to get her mind off it and remind her of your care/esteem (a movie, a walk, out to eat), and/or by checking in to see how she is feeling. As you are close, you will probably know what feels right in this area.
Up to a point, it's nice to try to cheer her up, but it probably won't seem to work very well for a while, and that's normal and okay. Don't feel that this is a rejection of you or take it personally that you can't 'make her happy again'. Your efforts, listening, being there, and not being 'scared away' by hard times and intense feelings is valuable on its own.