The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Sales$537,580Cost of merchandise sold305,240Gross profit$232,340Operating expenses:Depreciation expense$41,250Other operating expenses109,060Total operating expenses150,310Income before income tax$82,030Income tax expense22,760Net income$59,270

Changes in the balances of selected accounts from the beginning to the end of the current year are as follows:

Increase DecreaseAccounts receivable (net)$(11,910)Inventories4,150Prepaid expenses(3,970)Accounts payable (merchandise creditors)(8,480)Accrued expenses payable (operating expenses)1,190Income tax payable(2,840)

Question Content Area

a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Cash flows from (used for) operating activities:Accounts payableCash received from customersDepreciationNet incomeSales$- Select -Accounts payableCash paid for merchandiseCollections of accounts receivableDepreciationNet income- Select -Accounts payableAccounts receivableCash paid for operating expensesDepreciationSales- Select -Accounts payableAccounts receivableCash paid for income taxesNet incomeSales- Select -Net cash flow from operating activities$fill in the blank ca874d01e044062_9

Question Content Area

b. What does the direct method show about a companys cash flows from operating activities that is not shown using the indirect method?

With the

direct method or indirect method

, the cash received less the cash paid is the net cash flows from operating activities. Individual cash receipts and payments are reported in the Cash Flows from (used for) Operating Activities section.

The

direct method or indirect method

adjusts accrual basis net income for revenues and expenses that do not involve the receipt or payment of cash to arrive at net cash flows from operating activities.