Operating Activities Section, Direct Method. Polly’s Imported Goods, Ltd. recently issued its annual report for the current year. Polly’s comparative balance sheets for the current year are presented below. Prepare the operating activities section of the statement of cash flows using the direct method. Assume accrued expenses relate to selling, general and administrative expenses.

Polly’s Imported Goods, Ltd.

Income Statement

For the Year Ended December 31

Sales………………………………………………….            $ 137,710

Cost of Goods Sold………………………………….            82,626

Gross Profit…………………………………………..            $ 55,084

Selling, General, and Administrative Expenses………           $ 23,584

Depreciation Expense…………………………………          8,000

Total Operating Expenses……………………………..          $ 31,584

Income Before Interest and Taxes………………….....          $ 23,500

Interest Expense……………………………………….         $ (6,000)

Income Before Tax…………………………………….         $ 17,500

Income Tax Expense…………………………………..          (7,000)

Net Income…………………………………………….         $ 10,500

Transcribed Image Text:

Polly's Imported Goods, Ltd. Balance Sheets At December 31 Total Current Assets Property, Plant, and Equipment-net Indefinite life Intangible Assets Income Taxes Payable Noncurrent Liabilities Total Noncurrent Labilities Common Stock, $1 par valuo Total Shareholders' Equity Total Liabilities and Sharehclders Equity $240,000