The income statement and a partial balance sheet for Jefferson Company is presented below. Prepare the operating activities section of the statement of cash flows using the indirect method.

Jefferson Company

Income Statement

For the Year Ended December 31, 2006

Sales		$500,000
Cost of goods sold		390,000
Gross profit		$110,000
Operating expenses:
Salaries	$70,000
Depreciation expense	20,000
Miscellaneous	10,000	100,000
Net income		$10,000

Jefferson Company

Partial Balance Sheet

December 31, 20X6

	12/31/2006	12/31/2005
Cash	$80,000	$65,000
Accounts receivable (net)	57,000	50,000
Inventories	102,000	86,000
Prepaid expenses	4,500	4,000
Accounts payable (merchandise)	58,000	51,000
Salaries payable	7,500	6,000