The income statement for Dunn Products Inc. is presented below.

The following balance sheet changes occurred during the year:
Accounts receivable decreased by $80,000
Inventory increased by $150,000
Prepaid expenses increased by $99,000
Accounts payable decreased by $54,000
Salaries payable increased by $21,000

Required:
1. Prepare the net cash flows from operating activities using the indirect method.
2. What are the causes of the major differences between net income and net cash flow from operatingactivities?

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Dunn Products Inc. Income Statement For the Year Ended December 31, 2009 Sales Cost of goods sold Gross margin Operating expenses: $3,700,000 2,157,000 Salaries expense Administrative expense Bad debt expense Depreciation expense Other expenses $358,000 147,000 37,000 485,000 328,000 1,355,000 Net income