Answer and Explanation:
The preparation of the operating activities section is shown below:
Particulars Amount
Cash flow from operating activities
Net income for the fiscal year $719,000
Adjustment for non-cash effects:
Depreciation and amortization $86,000
Changes in operating assets and liabilities:
Add: Decrease in accounts receivable $41,000
Less: Increase in inventories ($11,100)
Less: Increase in prepaid expenses ($10,400)
Add: Increase in salary payable $11,900
Less: Decrease in income tax payable ($17,000)
Net cash flows from operating activities $819,400
