The income statement for Hanalei International Inc. is presented here:
HANALEI INTERNATIONAL INC.
Income Statement
Year Ended December 31, 2018
Fees earned.....................................................$565,000
Operating expenses..........................................365,000
Income from operations...................................200,000
Interest expense.................................................10,000
Income before income tax...............................190,000
Income tax expense...........................................47,500
Net income....................................................$142,500
Hanalei's statement of financial position contained the following account balances:

Additional information:
1. Operating expenses include depreciation expense, $45,000; amortization expense, $5,000; administrative expenses, $40,000; salaries expense, $300,000; and gain on disposal of equipment, $25,000.
2. Unearned revenue is received from customers.
3. Prepaid insurance and accounts payable relate to operating (administrative) expenses.
Instructions
(a) Prepare the operating activities section of the statement of cash flows, using
(1) The indirect method, and
(2) The direct method.
(b) Which method-indirect or direct-do you recommend that this company use to prepare its operating activities section? Explain your reasoning.

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2018 2017 Accounts receivable $50,000 $60,000 Prepaid insurance 5,000 Accounts payable 40,000 31,000 Unearned revenue10,00014,000 Salaries payable 10,0007000 Interest payable Income tax payable 4,0003,000 1,0001,000O