Flip between the direct and indirect methods and watch both land on $20,000.
| Net income | $38,000 | |
| Add depreciation expense | +$24,000 | |
| Add loss on sale of plant assets | +$6,000 | |
| Subtract gain on retirement of notes | −$16,000 | |
| Subtract increase in accounts receivable | −$20,000 | |
| Subtract increase in merchandise inventory | −$14,000 | |
| Subtract increase in prepaid expenses | −$2,000 | |
| Subtract decrease in accounts payable | −$5,000 | |
| Subtract decrease in interest payable | −$1,000 | |
| Add increase in income taxes payable | +$10,000 | |
| Net cash from operating activities | $20,000 |
$20,000
$20,000
Direct $20,000 = Indirect $20,000
Touch the instrument to see what to notice.