The income statement for Granville Manufacturing Company is presented below.

The following balance sheet changes occurred during the year:
Accounts receivable increased by $900,000.
Inventory decreased by $110,000.
Prepaid expenses increased by $49,000.
Accounts payable increased by $132,000.
Salaries payable decreased by $58,000.

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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Granville Manufacturing Company Income Statement For the Year Ended December 31, 2009 Sales Cost of goods sold Gross margin Operating expenses: $4,200,000 1,720,000 $2,480,000 Salaries expense Administrative expense Bad debt expense Depreciation expense Other expenses $720,000 131,000 156,000 610,000 255,000 1,872,000 S 608,000 Net income