Operating Activities Section—Direct Method The following account balances for the noncash current assets and current liabilities of Labrador Company are available:

Required 1. Prepare the Operating Activities section of the statement of cash flows using the direct method.
2. What does the use of the direct method reveal about a company that the indirect method does not?

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December 31 2008 2007 Accounts receivable $ 4,000 $ 6,000 Inventory 32,000 25,000 Office supplies 7,000 10,000 Accounts payable 7,500 4,500 Salaries and wages payable 1,500 2,500 Interest payable 500 1,000 Income taxes payable 4,500 3,000 In addition, the income statement for 2008 is as follows: Sales revenue Cost of goods sold Gross profit General and administrative expense Depreciation expense Total operating expenses Income before interest and taxes Interest expense Income before tax Income tax expense Net income 2008 $100,000 75,000 $ 25,000 $ 8,000 3,000 $ 11,000 $ 14,000 3,000 $ 11,000 5,000 $ 6,000