Cash flows from operating activities—indirect method OBJ. 1, 2 The income statement disclosed the following items for 2016:

Depreciation expense $ 57,600 Gain on disposal of equipment 33,600 Net income 508,000 Balances of the current assets and current liability accounts changed between December 31, 2015, and December 31, 2016, as follows:

Increase

(Decrease)

Accounts receivable $8,960 Inventory (5,120)

Prepaid insurance (1,920)

Accounts payable (6,080)

Income taxes payable 1,410 Dividends payable 2,200

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 flows from operating activities is different than net income.