1. Answer the following:

- The income statement disclosed the following items for the year:

Depreciation expense	$56,600
Gain on disposal of equipment	33,020
Net income	336,100

The changes in the current asset and liability accounts for the year are as follows:

	Increase (Decrease)
Accounts receivable	$8,820
Inventory	(5,020)
Prepaid insurance	(1,880)
Accounts payable	(5,980)
Income taxes payable	1,880
Dividends payable	1,320

a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)

Cash flows from (used for) operating activities:
Depreciation expenseGain on disposal of equipmentIncrease in income taxes payableIncrease in inventoriesNet income	$- Select -
Adjustments to reconcile net income to net cash flows from (used for) operating activities:
Decrease in accounts receivableDepreciation expenseIncrease in accounts receivableIncrease in income taxes payableLoss on disposal of equipment	- Select -
Decrease in prepaid insuranceGain on disposal of equipmentIncrease in accounts receivableIncrease in income taxes payableLoss on disposal of equipment	- Select -
Changes in current operating assets and liabilities:
Decrease in income taxes payableDepreciation expenseGain on disposal of equipmentIncrease in accounts receivableIncrease in inventory	- Select -
Decrease in accounts receivableDecrease in inventoryGain on disposal of equipmentIncrease in inventoryIncrease in prepaid insurance	- Select -
Decrease in accounts receivableDecrease in prepaid insuranceGain on disposal of equipmentIncrease in prepaid insuranceLoss on disposal of equipment	- Select -
Decrease in accounts payableDecrease in income taxes payableDepreciation expenseGain on disposal of equipmentIncrease in accounts payable	- Select -
Decrease in accounts receivableDecrease in income taxes payableGain on disposal of equipmentIncrease in income taxes payableIncrease in prepaid insurance	- Select -
Net cash flows from operating activities		$fill in the blank 5305a6f5cfceff3_17

b. Why is net cash flows from operating activities different than net income?

Cash flows from operating activities is based on

accrual basis cash basistax basis

of accounting, whereas net income is computed using

accrual basis cash basistax basis

- Cosmat Inc. reported net income of $128,000 for 20Y9. The liability and equity accounts from the companys comparative balance sheet are as follows:

	Dec. 31, 20Y9			Dec. 31, 20Y8
Accounts payable		$57,920			$53,810
Dividends payable		20,000			16,000
Bonds payable		290,000			450,000
Common stock, $10 par value		180,000			120,000
Paid-in capital in excess of parcommon stock		328,000			232,000
Retained earnings		488,000			375,000

During the year, the company retired bonds payable at their face amount, declared dividends of $15,000, and issued 6,000 shares of common stock for $26 per share.

Prepare the Cash Flows from (used for) Financing Activities section of the statement of cash flows. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Cosmat Inc. Statement of Cash Flows (partial)

Cash flows from (used for) financing activities:
Cash paid for income taxesCash paid for merchandiseCash paid for operating expensesCash paid to retire bonds payableCash received from issuing common stock	$- Select -
Cash paid for income taxesCash paid for merchandiseCash paid for operating expensesCash paid to retire bonds payableCash received from sale of investments	- Select -
Cash dividendsCash paid for income taxesCash paid for merchandiseCash paid for operating expensesCash received from sale of investments	- Select -
Net cash flows from financing activitiesNet cash flows used for financing activitiesNet decrease in cashNet incomeNet increase in cash		$- Select -

of accounting.