The income statement disclosed the following items for 2016:

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

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

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

Balances of the current assets and current liability accounts changed between December 31, 2015, and December 31, 2016, 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 flows from operating activities is different than net income.