The income statement disclosed the following items for the year:

Depreciation expense...............................................$ 57,600

Gain on disposal of equipment................................33,600

Net income.................................................................508,000

The changes in the current asset and liability accounts for the year are as follows: 

Increase

(Decrease)

Accounts receivable.................................$ 8,960

Inventory...................................................(5,120)

Prepaid insurance....................................(1,920)

Accounts payable.....................................(6,080)

Income taxes payable..............................1,410

Dividends payable....................................2,200

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 flow from operating activities is different than net income.