Arch Associates Reports the Following Comparative Balance Sheets and Income

Arch Associates reports the following comparative balance sheets and income statement information. $\begin{array}{c}\text { Arch Associates}\\ \text { Comparative Balance Sheets}\\\\\begin{array}{lr}&12 / 31 / \text { Year } 1 &12 / 31 / \text { Year } 2\\\text { Cash } & \$ 12,000&\$22,000\\\text { Accounts receivable } & 4,000&8,000 \\\text { Prepaid insurance } & 10,000&8,000 \\\text { Inventory } & 6,000 &2,000\\\text { Property, plant and equipment } & \underline{12,000}&\underline{10,000} \\\text { Total assets } & \underline{ \$ 44,000}& \underline{50,000} \\\text { Accounts payable } & \$8, 000&\$12,000 \\\text { Salaries payable } & 10,000&4,000 \\\text { Long term notes payable } & 8,000 &6,000\\\text { Stockholders' equity } & \underline{18,000}& \underline{28,000} \\\text { Total liabilities and equity } & \underline{ \$ 44,000}& \underline{\$50,000}\end{array}\end{array}$
$\begin{array}{lcr} & \begin{array}{l}\text { Income Statement } \\\text { Year Ended 12/31/Year 2 }\end{array} \\\text { Revenue } & & 70,000\\\text { Cost of goods sold } & & \underline{40,000} \\\text { Gross margin } & &30,000 \\\text { Operating expense } & & \underline{20,000 }\\\text { Net income } & & \underline{\$10,000} \\\end{array}$
Which of the following cash flows would be included under the operating activities section of the cash flow statement? (Assume the direct method is used.)

A) Cash received from issuing bonds payable.
B) Cash paid to purchase equipment.
C) Cash receipts from dividends.
D) None of these answers are correct.