Reporting Net Cash Flow from Operating Activities The statement of earnings for Morsi Products is presented below.

The following statement of financial position changes occurred during the year:
- Accounts receivable decreased by \(\$ 85,150\)
- Inventory decreased by \(\$ 138,620\)
- Prepaid expenses increased by \(\$ 112,400\)
- Accounts payable decreased by \(\$ 67,225\)
- Salaries payable increased by \(\$ 18,300\)
\section*{Required:}
1. Prepare the net cash flows from operating activities using the indirect method.
2. CONCEPTUAL CONNECTION What are the causes of the major differences between net income and net cash flow from operating activities?

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Sales Cost of goods sold Gross margin Other expenses: Salaries expense Administrative expense Depreciation expense Bad debt expense Income tax expense Net income Morsi Products Statement of Earnings For the Year Ended December 31, 2018 $3,584,600 2,557,500 1,027,100 $455,100 247,000 214,500 37,000 28,200 981,800 $ 45,300