Direct and Indirect Methods The Dauve Company reported the following condensed income statement for 2007:

Sales

$100,000

Cost of goods sold

58,000

Gross profit

$42,000

Operating expenses

Depreciation expense

$8,000

Salaries expense

12,000

20,000

Income before income taxes

$22,000

Income tax expense

6,600

Net income

$15,400

During 2007, the following changes occurred in the company’s current assets and current liabilities:

Increase (Decrease)

Cash

$3,700

Accounts receivable

5,500

Inventories

8,900

Accounts payable (purchases)

4,600

Salaries payable

2,800

Required

1. By visual inspection, prepare the net cash flow from operating activities section of the Dauve Company’s 2007 statement of cash flows using the indirect method.

2. By visual inspection, prepare the net cash flow from operating activities section of the Dauve Company’s 2007 statement of cash flows using the direct method.