Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $151,100. Depreciation recorded on store equipment for the year amounted to $24,900. 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	$58,630		$53,940
Accounts receivable (net)	42,040		39,860
Merchandise inventory	57,400		60,680
Prepaid expenses	6,450		5,120
Accounts payable (merchandise creditors)	54,940		51,030
Wages payable	30,020		33,330

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 out flows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)
Cash flows from operating activities:
Net income	$	_______
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation		_______
Changes in current operating assets and liabilities:
Increase in inventories		_______
Decrease in prepaid expenses		_______
Decrease in accounts receivable		_______
Decrease in accounts payable		_______
Decrease in wages payable		_______
Net cash flow from operating activities		$______

b. Cash flows from operating activities differs from net income because it does not use the (accrual basis or cash basis) of accounting. For example revenues are recorded on the income statement when (they are earned/cash received) .