(Appendix 11A) Prepare the cash flows from operating activities using the direct method.

- The direct method for reporting cash flows from operating activities lists cash inflows and cash outflows for each type of operating activity that a company performs.

- Cash flows from operating activities are generally computed by adjusting each item on the statement of earnings by the changes in the related current asset or current liability accounts.

- Cash flow categories reported under the direct method include cash collected from customers, cash paid to suppliers, cash paid to employees, cash paid for interest, and cash paid for taxes.