The income statement disclosed the following items for the year:
Depreciation expense.......................$ 65,000
Gain on disposal of equipment..............27,500
Net income...................................620,000
The changes in the current asset and liability accounts for the year are as follows:
Increase (Decrease)
Accounts receivable............................$11,200
Inventory.........................................(6,350)
Prepaid insurance...............................(1,200)
Accounts payable...............................(4,200)
Income taxes payable............................1,650
Dividends payable...............................2,500
a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method.
b. Briefly explain why net cash flows from operating activities is different from net income.