Quitzau’s Supplies Inc.’s income statement for the year ended December 31, 2021, follows:

Additional information: 

■ Accounts receivable decreased $20,000 during the year. 

■ Accounts payable increased $15,000 during the year. 

■ Prepaid expenses increased $5,000 during the year. 

■ Income taxes payable decreased $3,000 during the year. 

■ Accrued interest payable increased $2,000 during the year. 

■ Quitzau has adopted a policy of reporting the cash flows arising from the receipt and payment of dividends and interest as an operating activity. 

Required:

Prepare the operating section of Quitzau’s statement of cash flows for the year ended December 31, 2021, using the direct method.

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Sales Cost of goods sold Quitzau's Supplies Inc. Income Statement Year Ended December 31, 2021 Beginning inventory Purchases Cost of goods available for sale Ending inventory Cost of goods sold Gross profit Operating expenses Interest expense Amortization and depreciation expense Income before income taxes Income tax expense Net income $500,000 400,000 900,000 300,000 $1,000,000 600,000 400,000 200,000 10,000 30,000 160,000 40,000 $ 120,000