Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 18

Cash flows from operating activities-indirect method
The net income reported on the income statement for the current year was $400,000. Depreciation recorded on store equipment for the year amounted to $16,000. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

a. Prepare the Cash Flows 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.