Operating Activities Section

Lafave Inc., a service company, has the following selected information at December 31, 2006 (see attachment).

Balance Sheets 2006 2005
Cash $83,000 $61,000
Accounts receivable 78,000 86,000
Prepaid Expenses 12,000 6,000
Accounts Payable 92,000 87,000
Income Taxes Payable 17,000 13,000

Income statement for 2006
Sales Revenue $173,000
Operating Expenses 160,000
Income before income taxes 13,000
Income tax expense 6,000
Net Income $7,000

Operating Expenses include $4,000 of depreciation expense.

Instructions
(a) Using the direct method, prepare the operating activities section of the statement of
cash flows for 2006.
(b) Using the indirect method, prepare the operating activities section of the statement of
cash flows for 2006.