Chapter 23, Problem 4E

To determine

Operating activities: The items that are directly linked with the transactions that affect the net income of the company are termed as operating activities.

Direct method: It reports cash receipts and disbursements arising out of operating activities. Difference between these amounts helps us arrive at the net cash flows from operating activities.

To prepare: To prepare operating section of the statement of cash flows.

Given information: Income statement for the year 2017 is as below.

Particulars	Amount ($)	Amount ($)
Sales revenue		6,900,000
COGS:
Beginning inventory	1,900,000
Purchases	4,400,000
Goods available for sale	6,300,000
Ending inventory	1,600,000
Cost of goods sold		4,700,000
Gross profit		2,200,000
Operating expenses
Selling expense	450,000
Administrative expenses	700,000	1,150,000
Net Income		1,050,000