Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was 5125,200. Depreciation recorded on store equipment for the year amounted to 520,800. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash 549,600 545,140 Accounts receivable (net) 35,560 33,350 Merchandise inventory 48,560 50,780 Prepaid expenses 5,460 Accounts payable (merchandise creditors) 46,480 42,700 Wages payable 25,400 27,900 4,290 a. Prepare the Cash Flows from 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 operating activities: Net income $ 126,200 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable Decrease in merchandise inventory Increase in prepaid expenses Increase in accounts payable Decrease in wages payable Net cash flow from operating activities of accounting. b. Cash flows from operating activities differs from net income because it does not use the accrual basis For example revenues are recorded on the income statement when they are earned