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

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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,300*
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,040*
Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,320*
Accrued expenses payable (operating expenses) . . . . . . . . . . . . . . . . . . . . . . . . . 660
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440*
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method.
b. What does the direct method show about a company€™s cash flow from operating activities that is not shown using the indirectmethod?

Transcribed Image Text:

Sales Cost of merchandise sold $273,600 155,400 $118,200 . . Operating expenses: Depreciation expense . _ . . . . $21,000 76,440 41,760 11,580 30,180 Income before income tax