Direct Method \begin{tabular}{lccll} Balance Sheet & Beginning & Ending & Income Statement & Cash Inflow (Outflow) \\ \hline 1. Accounts receivable & $2,000 & $5,000 & Sales on account, $15,000 \\ 2. Prepaid insurance & $4,000 & $3,000 & Insurance expense, $7,000 \\ 3. Income taxes payable & $6,000 & $9,000 & Income tax expense, $20,000 \\ 4. Wages payable & $5,000 & $3,000 & Wages expense, $25,000 \end{tabular}