QUESTION: Prepare the operating activities section of cash flows (indirect method) using given information:

(PLS HELP): *I don't understand how to determine which accounts (from 1st image) go into the operating activities section in the answer (2nd image)*

ANSWER:

Example 12-5: The ABC Company's 2021 and 2022 balance sheets included the following items: The Carpet Company's income statement was as follows: For the Year Ended December 31, 2022 Required: Prepare the statement of cash flows under the indirect method for the year ended December 31,2022. Additional information includes the following: a. Equipment costing $3,500 was purchased during the year. b. Fully depreciated equipment that cost $500 was discarded and its cost and accumulated depreciation were removed from the accounts. c. Two hundred shares of stock were sold and issued at $15 per share. d. The company declared $4,000 of cash dividends and paid $2,500. Statement of Cash Flows For Year Ended December 31, 2022