Presented below is the income statement of Hongha Ltd for the year ended 31 Dec 2020:

Sales $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 85,000
Income before income taxes 70,000
Income taxes 28,000
Net income $ 42,000
In addition, the following information related to net changes in working capital is
presented:

ALL in $31 Dec 201931 Dec 2020Changes
Accounts receivable20,00035,000Increased by 15,000
Inventories31,00011,600Decreased by 19,400
Salaries payable (operating
expenses)
12,0004,000Decreased by 8,000
Accounts payable8,50020,500Increased by 12,000
Income tax payable31,00028,000Decreased by 3,000


The company also indicates that depreciation expense for the year was $16,700.
Required:
a) Prepare a schedule computing the net cash flow from operating activities that
would be shown on a statement of cash flows using the indirect method. (show all
your workings) (8 marks)
b) Explain the difference between net income and net cash flows from operating
activities. (2 marks)
c) Assume you are the manager of business. Is the statement of cash flows necessary
for you? Why? (10 marks)
d) Which method (direct method or indirect method) do you prefer to prepare cash
flows statement? Why? (10 marks)