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 Year 2 Year 1 Accounts receivable $22,800 $27,000 Merchandise inventory 59,000 48,700 Prepaid insurance. 17,000 26,400 Accounts payable 25,700 16,900 Salaries payable 4,650 3,850 Unearned service revenue 650 2,750 The Year 2 income statement is shown below: Income Statement Sales $ 616,000 Cost of goods sold Gross margin Service revenue Insurance expense (378,000) 238,000 4,700 (38,000) (144,000) Depreciation expense (4,300) Salaries expense Operating income. Gain on sale of equipment Net income Required 56,400 4,500 S 60,900 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. < Prev 5 of 11 Next >