The income statement of Hanalei International Inc. contained the following condensed information:

Hanalei's balance sheet contained the following comparative data at December 31:

Additional information: Accounts payable relate to operating expenses.
Instructions
Assuming Hanalei reports under ASPE, prepare the operating activities section of the cash flow statement using either (a) the indirect method or (b) the direct method, as assigned by your instructor.
TAKING IT FURTHER
What are the advantages and disadvantages of the direct method of determining cash provided (used) by operating activities?

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HANALEI INTERNATIONAL INC. Income Statement Year Ended December 31, 2017 Service revenue Operating expenses Depreciation expense Loss on sale of equipment Profit from operations Other revenues and expenses $480,000 $245,000 35,000 25,000 305,000 175,000 Interest expense Profit before income taxes Income tax expense Profit 10,000 165,000 41,250 $123,750 2017 $52,000 5,000 30,000 2,000 3,000 12,000 2016 Accounts receivable Prepaid insurance Accounts payable Interest payable Income tax payable Unearned revenue S40,000 8,000 41,000 1,250 4,500 8,000