Reporting Net Cash Flow from Operating Activities The statement of earnings for Colombo Manufacturing Company is presented below

The following statement of financial position changes occurred during the year:
- Accounts receivable increased by \(\$ 182,400\).
- Inventory increased by \(\$ 98,725\).
- Prepaid expenses decreased by \(\$ 64.100\).
- Accounts payable increased by \(\$ 43,850\).
- Salaries payable increased by \(\$ 54.900\).
\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?

\section*{Problem

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Sales Cost of goods sold Gross margin Operating expenses: Salaries expense Depreciation expense Administrative expense Bad debt expense Other expenses Net income Colombo Manufacturing Company Statement of Earnings For the Year Ended December 31, 2018 $831,800 246,100 131,000 51,700 43,900 $4,199,830 2,787,210 1,412,620 1,304,500 $ 108,120