Cash flows from operating activities—direct method OBJ. 3 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 merchandise 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.