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Cash Flows from Operating ActivitiesIndirect Method (Q.3)

The income statement disclosed the following items for year:

Depreciation expense	$53,600
Gain on disposal of equipment	31,270
Net income	411,500

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

	Increase (Decrease)
Accounts receivable	$8,350
Inventory	(4,750)
Prepaid insurance	(1,780)
Accounts payable	(5,660)
Income taxes payable	1,780
Dividends payable	1,250

a. Prepare the Cash Flows from 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.

Statement of Cash Flows (partial)
For the year ended xxx
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$

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

Cash flows from operating activities is based on of accounting, whereas net income is computed using of accounting.

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