Operating Activities Section-Direct Method The following account balances for the noncash current assets and current liabilities of Labrador Company are available: Accounts receivable Inventory office supplies Accounts payable Salaries and wages payable Interest payable Income taxes payable December 31 2016 2015 $ 4,000 $6,000 32,000 25,000 7,000 10,000 7,500 4,500 1,500 500 2,500 1,000 4,500 3,000 In addition, the income statement for 2016 is as follows: 2016 Sales revenue $100,000 Cost of goods sold 75,000 Gross profit $ 25,000 General and administrative expense $ 8,000 Depreciation expense 3,000 Total operating expenses $ 11,000 Income before interest and taxes $ 14,000 Interest expense 3,000 Income before tax $ 11,000 Income tax expense 5,000 $ 6,000 Net Income Required: Check My Work Previous 1. Prepare the Operating Activities section of the statement of cash flows using the direct method. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash. Labrador Company Partial Statement of Cash Flows For the Year Ended December 31, 2016 Cash Flows from Operating Activities Cash collected from customers Cash payments for: Inventory General and administrative Interest Taxes Total cash payments Net cash provided by operating activities Fendback Check My Work 2. All of the following reveal what the use of the direct method does which the indirect method does not do EXCEPT for: a. The direct method shows the users the specific amounts collected and paid for operating purposes. b. The indirect method just simply reconciles net income of the period to the cash flow from operations without having to detail the cash actually received and the cash paid. C. The use of the direct method shows collections from customers and amounts paid for operating purposes. d. The use of the direct method will give a higher net cash flow from operating activities as compared to the indirect method. d