Problem 14-14A (Algo) The direct versus the indirect method of determining cash flow from operating activities LO 14-1, 14-2 Gibson Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Gibson's Year 2 and Year 1 year-end balance sheets: Account Title Merchandise inventory Accounts receivable Prepaid insurance Accounts payable Year 2 Year 1 $29,800 $23,000 58,600 51,900 16,000 25,100 25,800 18,300 Salaries payable 4,800 3,850 Unearned service revenue 800 3,000 The Year 2 income statement is shown below: Income Statement Sales $ 622,000 Cost of goods sold Gross margin Service revenue Insurance expense (370,000) 252,000 4,300 (38,000) (141,000) Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income Required (4,000) 73,300 4,900 $ 78,200 a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.) GIBSON BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Inventory Insurance Salaries Net cash flow from operating activities $ 0 < Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) GIBSON BRANDS, INC. Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Net income Add: Decrease in accounts receivable Decrease in prepaid insurance Increase in accounts payable Increase in salaries payable Deduct: Increase in merchandise inventory Decrease in unearned service revenue Add: noncash expenses Depreciation expense Deduct: Gain on sale of equipment Net cash flow from operating activities S 0 < Required A Required B >