The income statement disclosed the following items for the year: Depreciation expense    $  57,600Gain on disposal of equipment    33,600Net income    508,000The changes in the current asset and liability accounts for the year are 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  Prepare the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method.  Briefly explain why net cash flow from operating activities is different than net income.

Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter7: Fixed Assets, Natural Resources, And Intangible Assets
Section: Chapter Questions
Problem 7.3.2MBA
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The income statement disclosed the following items for the year:

Depreciation expense    $  57,600
Gain on disposal of equipment    33,600
Net income    508,000
The changes in the current asset and liability accounts for the year are 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  
Prepare the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method.

 Briefly explain why net cash flow from operating activities is different than net income.

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