Cash flows from (used for) operating activitiesindirect method

The income statement disclosed the following items for the year:

Line Item Description	Amount
Depreciation expense	$39,700
Gain on disposal of equipment	23,180
Net income	284,700

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

Line Item Description	Increase (Decrease)
Accounts receivable	$6,190
Inventory	(3,520)
Prepaid insurance	(1,320)
Accounts payable	(4,200)
Income taxes payable	1,320
Dividends payable	930

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 out flows, cash payments, decreases in cash, or any negative adjustments.

Line Item Description	Amount	Amount
Cash flows from (used for) operatingactivities:
DepreciationDecrease in inventoriesIncrease in income taxes payableIncrease in inventoriesNet income	$- Select -
Adjustments to reconcile net incometo net cash flows from (used for) operating activities:
Decrease in accounts receivableDepreciationIncrease in accounts receivableLoss on disposal of equipmentNet income	- Select -
Decrease in prepaid insuranceGain on disposal of equipmentIncrease in accounts receivableLoss on disposal of equipmentNet income	- Select -
Changes in current operating assetsand liabilities:
Decrease in income taxes payableDepreciationIncrease in accounts receivableIncrease in inventoryNet income	- Select -
Decrease in accounts receivableDecrease in inventoryIncrease in inventoryIncrease in prepaid insuranceNet income	- Select -
Decrease in accounts receivableDecrease in prepaid insuranceIncrease in inventoryIncrease in prepaid insuranceNet income	- Select -
Decrease in accounts payableDecrease in income taxes payableDepreciationIncrease in accounts payableNet income	- Select -
Decrease in accounts receivableDecrease in income taxes payableIncrease in income taxes payableIncrease in prepaid insuranceNet income	- Select -
Net cash flows from operating activitiesNet cash flows used for operating activities		$- Select -

Question Content Area

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 using fill in the blank 2 of 2

accrual basis cash basistax basis

of accounting.