REPORTING NET CASH FLOW FROM OPERATING ACTIVITIES The income statement for Dunn Products Inc. is presented below.

Dunn Products Inc.

Income Statement For the Year Ended December 31, 2009 Sales $3,700,000 Cost of goods sold 2,157,000 Gross margin $1,543,000 Operating expenses:

Salaries expense $358,000 Administrative expense 147,000 Bad debt expense 37,000 Depreciation expense 485,000 Other expenses 328,000 1,355,000 Net income $ 188,000 The following balance sheet changes occurred during the year:

. Accounts receivable decreased by $80,000

. Inventory increased by $150,000

. Prepaid expenses increased by $99,000

. Accounts payable decreased by $54,000

. Salaries payable increased by $21,000 Required:

. Prepare the net cash flows from operating activities using the indirect method.

. What are the causes of the major differences between net income and net cash flow from operating activities.