Incorporated, presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Adams$$s Year $2$ and Year $1$ year$-$end balance sheets. Assume that Accounts Payable is used for purchases of inventory only.

Account Title Year $2$ Year $1$

Accounts receivable $$20,900$ $$27,000$

Merchandise inventory $56,30050,100$

Prepaid insurance $17,50027,000$

Accounts payable $23,10019,100$

Salaries payable $4,6504,000$

Unearned service revenue $7503,000$

The Year $2$ income statement is shown below:

Income Statement

Sales $$610,000$

Cost of goods sold $(372,000)$

Gross margin $238,000$

Service revenue $5,400$

Insurance expense $(38,000)$

Salaries expense $(145,000)$

Depreciation expense $(4,700)$

Operating income $55,700$

Gain on sale of equipment $3,500$

Net income $$59,200$

Required

Prepare the operating activities section of the statement of cash flows using the direct method.

Prepare the operating activities section of the statement of cash flows using the indirect method.