The income statement disclosed the following items for 2013:
Depreciation expense .........$ 21,600
Gain on disposal of equipment ......12,600
Net income ..............190,500
Balances of the current assets and current liability accounts changed between December 31, 2012, and December 31, 2013, as follows:
Accounts receivable ......$3,360
Inventory ............1,920*
Prepaid insurance ........720*
Accounts payable ........2,280*
Income taxes payable ........720
Dividends payable .........510
*Decrease
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method.
b. Briefly explain why cash flows from operating activities is different than net income.