Service Company had net income during the current year of $65,800. The following information was obtained from Service's balance sheet:
Accounts receivable ............................ $26,540 increase
Inventory .......................................... 32,180 increase
Accounts payable ................................. 9,300 decrease
Interest payable .................................... 2,120 increase
Accumulated depreciation (Building) ........ 14,590 increase
Accumulated depreciation (Equipment) ...... 32,350 increase
Additional Information:
1. Equipment with accumulated depreciation of $18,000 was sold during the year.
2. Cash dividends of $29,625 were paid during the year.
Required:
1. Prepare the net cash flows from operating activities using the indirect method.
2. How would the cash proceeds from the sale of equipment be reported on the statement of cash flows?
3. How would the cash dividends be reported on the statement of cash flows?
4. What could the difference between net income and cash flow from operating activities signal to financial statement users?