Cash flows from operating activities—indirect method OBJ. 1, 2 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:

End of Year Beginning of Year Cash $41,600 $38,400 Accounts receivable (net) 30,400 28,000 Merchandise inventory 40,000 44,000 Prepaid expenses 4,800 3,600 Accounts payable (merchandise creditors) 40,000 36,000 Wages payable 21,200 24,000

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.