Napoleon Incorporated presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from the company€™s 2014 and 2013 year-end balance sheets:

The 2014 income statement showed net income of $41,500.

Required
a. Prepare the operating activities section of the statement of cash flows.
b. Explain why the change in the balance in accounts receivable was added to or subtracted from the amount of net income when you completed Requirement a.
c. Explain why the change in the balance in accounts payable was added to or subtracted from the amount of net income when you completed Requirement a.

Account Title Accounts receivable Accounts payable 2014 2013 S31,400 10,300 $28,600 9,800