The direct versus the indirect method to determine cash flow from operating activities Top Brands, Inc. (TBI), presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from TBI's 2012 and 2011 year-end balance sheets.

The 2012 income statement is shown below:

Required
a. Prepare the operating activities section of the statement of cash flows using the direct method.
b. Prepare the operating activities section of the statement of cash flows using the indirect method.

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Account Title 2011 2012 Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue $24,000 $26,000 19,000 23,000 4,600 1,000 24,000 20,000 4,200 2,700