Cash flows from operating activities—indirect method Obj. 1, 2 The net income reported on the income statement for the current year was $214,000. Depreciation recorded on equipment and a building amounted to $99,300 for the year. 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 $ 75,900 $ 86,150 Accounts receivable (net) 82,150 88,750 Inventories 181,600 178,000 Prepaid expenses 4,800 5,100 Accounts payable (merchandise creditors) 93,700 115,000 Salaries payable 6,500 4,900

a. Prepare the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method.

b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

AppendixLO1