The income statement disclosed the following items for 2014:
Depreciation expense .......... $ 72,000
Gain on disposal of equipment....... 42,000
Net income ............... 635,000
Balances of the current assets and current liability accounts changed between December 31, 2013, and December 31, 2014, as follows:
Accounts receivable............ $11,200
Inventory................ 6,400*
Prepaid insurance............. 2,400*
Accounts payable............. 7,600*
Income taxes payable........... 2,400
Dividends payable............. 1,700
*Decrease
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 flows from operating activities is different than net income.