The income statement for Dunn Products Inc. is presented below.

The following balance sheet changes occurred during the year:
Accounts receivable decreased by $80,000
Inventory increased by $150,000
Prepaid expenses increased by $99,000
Accounts payable decreased by $54,000
Salaries payable increased by $21,000

Required:
1. Prepare the net cash flows from operating activities using the indirect method.
2. What are the causes of the major differences between net income and net cash flow from operatingactivities?

Dunn Products Inc. Income Statement For the Year Ended December 31, 2009 Sales Cost of goods sold Gross margin Operating expenses: $3,700,000 2,157,000 Salaries expense Administrative expense Bad debt expense Depreciation expense Other expenses $358,000 147,000 37,000 485,000 328,000 1,355,000 Net income