Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI’s Year 2 and Year 1 year-end balance sheets:

The Year 2 income statement is shown next: Income Statement
Sales .....................................................................$720,000
Cost of goods sold  ..............................................(398,000)
Gross margin  .......................................................322,000
Service revenue  ....................................................6,000
Insurance expense  ...............................................(36,000)
Salaries expense  ....................................................(195,000)
Depreciation expense  ...........................................(12,000)
Operating income  ..................................................85,000
Gain on sale of equipment  ...................................4,500
Net income  ..............................................................$ 89,500

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 Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue Year 2 Year 1 $48,000 $52,000 78,000 72,000 24,000 31,000 28,000 7,800 2,400 3,600