Chapter 13, Problem 13.5EX

Cash flows from operating activities —indirect method

The net income reported on the income statement for the current year was $73,600. Depreciation recorded on sore equipment for the year amounted to $27,400. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year	Beginning of Year
Cash	$23,500	$18,700
Accounts receivable (net)	56,000	48,000
Inventories	35,500	40,000
Prepaid expenses	4,750	7,000
Accounts payable (merchandise creditors)	21,800	16,800
Wages payable	4,900	5,800

• A. Prepare the Cash Mows from Operating Activities section of the statement of cash flows, using the indirect method.
• B. Briefly explain why net cash flow from operating activities is different than net income.