Cash Flows from Operating ActivitiesDirect Method

The income statement of Booker T Industries Inc. for the current year ended June 30 is as follows:

Sales					$537,220
Cost of goods sold					305,030
Gross profit					$232,190
Operating expenses:
	Depreciation expense		$41,220
	Other operating expenses		108,980
		Total operating expenses			150,200
Income before income tax					$81,990
Income tax expense					22,760
Net income					$59,230

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)	$(11,910)
Inventories	4,150
Prepaid expenses	(3,970)
Accounts payable (merchandise creditors)	(8,470)
Accrued expenses payable (operating expenses)	1,180
Income tax payable	(2,840)

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 out flows, 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 companys 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.