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P13-4 Toby Direct method

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P13-4 The income statement of Toby Zed Company is presented here.




Toby Zed Company
Income Statement

Sales revenue   7,500,000
Cost of goods sold
   Beginning inventory  1,900,000
   Purchases  4,400,000
   Goods available for sale  6,300,000
   Ending inventory  1,400,000
Total cost of goods sold  4,900,000
Gross profit  2,600,000
Operating expenses  1,150,000
Net income  1,450,000

Additional information:
1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.
2. Prepaid expenses increased $175,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4. Accrued expenses payable decreased $105,000 during the year.
5. Operating expenses include depreciation expense of $85,000.

Instructions
Prepare the operating activities section of the statement of cash flows using the direct method.

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