Question: Software Distributors reports net income of $55,000. Included in that number is depreciation expense of $10,000 and a loss on the sale of land of $5,000. A comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $25,000, a decrease in inventory of $15,000, and an increase in accounts payable of $45,000.
Required: Prepare the operating activities section of the statement of cash flows using the indirect method. Do you see a pattern in Software Distributors' adjustments to net income to arrive at operating cash flows? What might this imply?