Cash flows from $($used for$)$ operating activities$$indirect method

The income statement disclosed the following items for the year:

Line Item DescriptionAmountDepreciation expense$$55,900$Gain on disposal of equipment$32,640$Net income$441,600$

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

Line Item DescriptionIncrease

$($Decrease$)$Accounts receivable$$8,710$Inventory$(4,960)$Prepaid insurance$(1,860)$Accounts payable$(5,910)$Income taxes payable$1,860$Dividends payable$1,310$

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

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a$.$ Prepare the "Cash flows from $($used for$)$ operating activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows $($partial$)$Line Item DescriptionAmountAmountCash flows from $($used for$)$ operating activities:

DepreciationDecrease in inventoriesIncrease in income taxes payableIncrease in inventoriesNet income

$fill in the blank $3$Adjustments to reconcile net income to net cash flows from $($used for$)$ operating activities:$$

Decrease in accounts receivableDepreciationIncrease in accounts receivableLoss on disposal of equipmentNet income

fill in the blank $5$

Decrease in prepaid insuranceGain on disposal of equipmentIncrease in accounts receivableLoss on disposal of equipmentNet income

fill in the blank $7$Changes in current operating assets and liabilities:$$

Decrease in income taxes payableDepreciationIncrease in accounts receivableIncrease in inventoryNet income

fill in the blank $9$

Decrease in accounts receivableDecrease in inventoryIncrease in inventoryIncrease in prepaid insuranceNet income

fill in the blank $11$

Decrease in accounts receivableDecrease in prepaid insuranceIncrease in inventoryIncrease in prepaid insuranceNet income

fill in the blank $13$

Decrease in accounts payableDecrease in income taxes payableDepreciationIncrease in accounts payableNet income

fill in the blank $15$

Decrease in accounts receivableDecrease in income taxes payableIncrease in income taxes payableIncrease in prepaid insuranceNet income

fill in the blank $17$

Net cash flows from operating activitiesNet cash flows used for operating activities

$fill in the blank $19$

b$.$ Why is net cash flows from operating activities different than net income?

Cash flows from operating activities is based on fill in the blank $1$ of $2$

accrual basis$$cash basistax basis

of accounting, whereas net income is computed usingfill in the blank $1$ of $2$

accrual basis$$cash basistax basis

of accounting.