Problem 14-14A (Algo) The direct versus the indirect method of determining cash flow from operating activities LO 14-1, 14-2 Zachary Brands, Inc., presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Zachary's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise inventory Year 2 Year 1 $27,100 $23,300 56,700 50,300 Prepaid insurance 17,000 25,500 Accounts payable 24,500 16,6007 Salaries payable 4,850 3,900 Unearned service revenue 700 2,800 The Year 2 income statement is shown below: Income Statement Sales Cost of goods sold Gross margin Service revenue $610,000 (372,000) 238,000 Insurance expense Salaries expense Depreciation expense Operating income Gain on sale of equipment Net income Required 4,300 (40,000) (160,000) (5,800) 36,500 4,700 $ 41,200 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.