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Why cash flows from operating activities is different

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Reference no: EM13509745

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.

Reference no: EM13509745

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