P17.2A (LO 2, 3 ) AP Molloy Ltd. reported the following for the fiscal year 2021:

Prepare operating activities sectionindirect and direct methods

MOLLOY LTD.

Income Statement

Year Ended September 30, 2021

Sales $580,000

Cost of goods sold 340,000

Gross profit 240,000

Operating expenses $96,000

Depreciation expense 25,000

Gain on sale of land (35,000) 86,000

Profit before income tax 154,000

Income tax expense 38,000

Profit $116,000

Additional information:

1. Accounts receivable decreased by $15,000 during the year.

2. Inventory increased by $7,000 during the year.

3. Prepaid expenses decreased by $5,000 during the year.

4. Accounts payable to suppliers increased by $10,000 during the year.

5. Accrued expenses payable increased by $4,000 during the year.

6. Income tax payable decreased by $6,000 during the year.

Instructions

Prepare the operating activities section of the cash flow statement using either (a) the indirect method or (b) the direct method, as assigned by your instructor.