Cash Flows from Operating Activities --Direct Method The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows: Sales $441,350 Cost of merchandise sold 250,600 Gross profit $190,750 Operating expenses: Depreciation expense Other operating expenses Total operating expenses Income before income tax $33,870 89,530 Income tax expense 123,400 $67,350 18,690 $48,660 Net Income Changes in the balances of selected accounts from the beginning to the end of the current year are as follows: Increase/ Decrease Accounts receivable (net) Inventories Prepaid expenses Accounts payable (merchandise creditors) Accrued expenses payable (operating expenses) $9,780 3,410 3,260- 6,960+ 970 Accrued expenses payable (operating expenses) 970 Income tax payable 2,340* a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the direct method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Booker T Industries Inc. Cash Flows from Operating Activities Section For the year ended on June 30 Cash flows from operating activities: Net cash flow from operating activities b. What does the direct method show about a company's cash flows from operating activities that is not shown using the Indirect method? with the the cash received less the cash payments is the net cash flow from operating activities. Individual cash receipts and payments are reported in the Cash Flows from Operating Activities section. The adjusts accrual basis net income for revenues and expenses that do not involve the receipt or payment of cash to arrive at cash flows from operating activities