ABC Company uses the direct method to prepare its statement of cash flows. Presented below are selected items from its financial statements.

$12/31/$Yr $312/31/$Yr $2$

Accounts receivable $$89,000$ $$56,000$

Prepaid insurance $$2,800$ $$4,600$

Wages payable $$9,500$ $$12,000$

Interest payable $$12,000$ $$8,900$

Sales revenue $$860,000$

Cost of goods sold $$495,000$

Wages expense $$110,000$

Insurance expense $$13,200$

Interest expense $$19,000$

Which of the following would be shown in the Operating Activities section related to wages?

$$2,500$ would be subtracted from net income

$$2,500$ would be added to net income

Cash paid to employees of $$112,500$

Cash paid to employees of $$107,500$