The following information relates to a capital lease between Bradford Electric Co. (lessee) and Widstoe Manufacturing Inc. (lessor). The lease term began on January 1, 2011. Widstoe recorded the lease as a sale and made the following entries related to the lease during 2011. Assume this was the only lease Widstoe had during the year.
Jan. 1 Deferred Initial Direct Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
1 Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
1 Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 70,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000
Deferred Initial Direct Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,132
Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,132
Dec. 31 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,132
Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,132
31 Lease Payments Receivable . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 6,242
Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 6,242

Instructions:
1. Prepare the partial Operating Activities section of the statement of cash flows for 2011 for Widstoe Manufacturing Inc. under the indirect method. Widstoe reported net income of $148,504 inclusive of the lease revenue in the preceding entries.
2. Prepare the partial Operating Activities section of the statement of cash flows for 2011 for Widstoe Manufacturing Inc. under the direct method. Assume that cash provided by operating activities exclusive of the lease transactions is $124,262.