Cash Flows from $($Used for$)$ Operating Activities

The income statement disclosed the following items for the year:

Depreciation expense $$36,200$

Gain on disposal of equipment $21,100$

Net income $229,800$

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

Increase

$($Decrease$)$

Accounts receivable $$5,630$

Inventory $(3,210)$

Prepaid insurance $(1,200)$

Accounts payable $(3,820)$

Income taxes payable $1,200$

Dividends payable $840$

Question Content Area

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 outflows, cash payments, decreases in cash, or any negative adjustments.

blank

Statement of Cash Flows $($partial$)$

Cash flows from $($used for$)$ operating activities:

Net income

$Net income

Adjustments to reconcile net income to net cash flows from $($used for$)$ operating activities:

Depreciation expense

Depreciation expense

Gain on disposal of equipment

Gain on disposal of equipment

Changes in current operating assets and liabilities:

Increase in accounts receivable

Increase in accounts receivable

Decrease in inventory

Decrease in inventory

Decrease in prepaid insurance

Decrease in prepaid insurance

Decrease in accounts payable

Decrease in accounts payable

Increase in income taxes payable

Increase in income taxes payable

Net cash flows from operating activities $fill in the blank $92$e$91906803$e$06$d$\_17$

Question Content Area

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

Cash flows from operating activities is based on

accrual basis

of accounting, whereas net income is computed using

cash basis

of accounting.