Reference no: EM131815220

Question - The income statement disclosed the following items for 2013:

Depreciation expense $21,600

Gain on disposal of equipment $12,600

Net income $190,500

Balances of the current assets 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 $510

*Decrease

A) Prepare the cash flows from operating activities section of the statement of cash flows, using the indirect method.

B) Briefly explain why cash flows from operating activities is different than net income.