Cash Flows from (Used for) Operating ActivitiesDirect Method

The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Sales					$511,000
Cost of merchandise sold					290,500
Gross profit					$220,500
Operating expenses:
	Depreciation expense		$39,200
	Other operating expenses		105,000
		Total operating expenses			144,200
Income before income tax					$76,300
Income tax expense					21,700
Net income					$54,600

Changes in the balances of selected accounts from the beginning to the end of the current year are as follows:

	Increase Decrease
Accounts receivable (net)	$(11,760)
Inventories	3,920
Prepaid expenses	(3,780)
Accounts payable (merchandise creditors)	(7,980)
Accrued expenses payable (operating expenses)	1,260
Income tax payable	(2,660)

a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Booker T Industries Inc.
Cash Flows from Operating Activities Section
For the year ended on June 30
Cash flows from (used for) operating activities:
	$fill in the blank 18654802af84f93_2
	fill in the blank 18654802af84f93_4
	fill in the blank 18654802af84f93_6
	fill in the blank 18654802af84f93_8
Net cash flow from operating activities		$fill in the blank 18654802af84f93_9

b. What does the direct method show about a companys cash flows from operating activities that is not shown using the indirect method?

With the , the cash received less the cash paid is the net cash flows from operating activities. Individual cash receipts and payments are reported in the Cash Flows from (used for) Operating Activities section.

The adjusts accrual basis net income for revenues and expenses that do not involve the receipt or payment of cash to arrive at net cash flows from operating activities.