Cash Flows from Operating Activities--Indirect Method The net income reported on the income statement for the current year was $117,500. Depreciation recorded on store equipment for the year amounted to $19,400. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: Cash Accounts receivable (net) Merchandise inventory End of Year Beginning of Year $45,590 $41,940 32,690 30,990 44,630 47,180 5,010 3,980 42,720 39,680 23,340 25,920 Prepaid expenses Accounts payable (merchandise creditors) Wages payable 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 $117.500 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 19.400 Net Income 117,500 19,400 1.700 X 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 2.5507 1,030 X 3.0407 2.580 Net cash flow from operating activities Tooded My Wor a. Calculate the increases and decreases in the current asset/Hability accounts over the period. Determine what affect these changes would have on cash b. Cash flows from operating activities differs from net income because it does not use the accrual bloof accounting. For example revenues are recorded on the income statement when they are earned