Determining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $161,000 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable	$3,100
Decrease in inventories	7,900
Depreciation	12,100
Gain on sale of investments	5,400
Increase in accounts payable	2,200
Increase in prepaid expenses	1,300
Increase in accounts receivable	5,900

a. Determine the net income reported by Curwen Inc. for the year ended December 31. $

b. Curwens net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference?

1. Because depreciation expense which has no effect on cash flows from operating activities.
2. Changes in current operating assets and liabilities that are added or deducted.
3. Changes in fixed assets and liabilities that are added or deducted.
4. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.