Cash flows from operating activities—direct method The income statement for Rhino Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows:

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 445,500 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (154,000)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 291,500 Operating expenses:

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,500 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  115,280 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (153,780)

Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 137,720 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,600)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,120 End of Year Beginning of Year Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,300 $31,240 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,400 80,300 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,520 15,840 Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . . . 67,540 62,700 Accrued expenses payable (operating expenses) . . . . . . . . . . . . . . . 19,140 20,900 Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,400 4,400 Prepare the “Cash flows from operating activities” section of the statement of cash flows, using the direct method.

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