The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Mike Roe Computers.

MIKE ROE COMPUTERS

Income Statement

For the Year Ended December 31, 2018

Sales $ 149.60

Cost of goods sold (89.80 )

Gross margin 59.80

Salaries expense $ 19.60

Insurance expense 11.60

Depreciation expense 4.80

Interest expense 5.80 (41.80 )

Gains and losses:

Gain on sale of equipment 11.60

Loss on sale of land (2.60 )

Income before tax 27.00

Income tax expense (13.50 )

Net income $ 13.50

Reconciliation of Net Income

to Net Cash Flows

from Operating Activities

Net income $ 13.50

Adjustments for noncash effects:

Decrease in accounts receivable 4.80

Gain on sale of equipment (11.60 )

Increase in inventory (5.80 )

Increase in accounts payable 8.80

Increase in salaries payable 2.80

Depreciation expense 4.80

Decrease in bond discount 2.90

Decrease in prepaid insurance 1.80

Loss on sale of land 2.60

Increase in income tax payable 5.80

Net cash flows from operating activities $ 30.40

Required:

ring the reporting period: received from customers, paid to suppliers, paid to employees, paid for interest, paid for insurance, paid for income taxes.

2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).