Cash flows from operating activities-Indirect method
The income statement disclosed the following items for 2013:
|
Depreciation expense
|
$21,600
|
|
Gain on disposal of equipment
|
12,600
|
|
Net income
|
190,500
|
Balance of the current asset and current liability accounts changed between December 31, 2012, and December 31, 2013, as follows:
|
Accounts receivable
|
$3,360
|
|
Inventory
|
1,920*
|
|
Prepaid Insurance
|
720*
|
|
Accounts payable
|
2,280*
|
|
Income taxes payable
|
720
|
|
Dividends payable
|
$10
|
|
*Decrease
|
|
a. Prepare the cash flows from operating Activities section of the statement of cash flows, using the indirect method.
Briefly explain why cash flows from operating activities is different than net income.