Question - Preparation of Operating Activities Section-Direct Method

The income statement of Rodriquez Company is shown below.

RODRIQUEZ COMPANY Income Statement For the Year Ended December 31, 2012

Sales $6,900,000

Cost of goods sold

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 expenses 450,000

Administrative expenses 700,000 1,150,000

Net income $1,050,000

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