I can't get the operating activities to reconcile either, but here's what I can tell you that is wrong:
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Cash Flows From Operating Activities
Dividends Received 152,000
Not an operating activity. It's related to an investment. It does have to be adjusted for the indirect method and this is not the only one where you're mixing up direct and indirect. Remember that in direct, you have to say where the cash directly went to or came from. Adding 152K for dividends received is like saying you received the cash for them, which you did - but it's not an operating activity. In the indirect method, you're starting with net income and making adjustments to it, and you'll be adjusting things that don't belong in operating - but that's an entirely different thing.
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Cash Paid to Suppliers and Employers (8,139,000)
Cash Paid for Income Taxes (425,000)
This is either incorrect or the problem was presented badly. It says "Cash paid to supplies and employers" and "Cash paid for income taxes." If it's "cash paid," then why adjust it? Notice the interest says "Interest expense," which needs adjusted to cash. If it says cash, it's either lying or it doesn't need adjusted to cash. (And even if you had to adjust the taxes, you'd subtract it not add. You're not being consistent. All accruals adjust the opposite direction of the change for direct method. i.e. taxes payable increased so you'd decrease -- that's a different rule than for indirect. And yup, you got to keep it all straight.)
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Cash Flows From Investing Activies
From Issuing Long Term Debt (1,906,000)
Two things wrong here. Part of it was used to retired another debt. I'm not quite sure if they want those two things listed separately. There's not a lot of info on that retirement of debt so it's hard telling. But more importantly, it's not an investing activity. ALL debt activities are financing.
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From Sale of Money Market Fud 800,000
They were a cash equivalent. So you traded cash for cash. This was never listed as an investment.
You missed the dividends received in here. Again, the dividends are related to an investing activity.
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Cash Flows From Financing Activities
Proceeds From Long Term Debt Issuance 850,000
For Retiring Debt 50000
Again, not enough info there to know exactly what's going on. If the new debt went through the financial institute, it's not really a cash activity at all. I'm also not sure what that extra 50,000 is about -- I think I took it as meaning they must've retired some bonds or something at a gain, but didn't say so. I think this is a bit of a problem with knowing how your book states things and therefore how to interpret them.
Either way, you missed the new debt cause you've got it up in investing.
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For Sales Loss (76,000)
OK, first, be more specific. That sounds like you lost sales. It's a loss on sale of assets. Second, assets aren't financing activities - they're investing activities. Third, the loss itself doesn't even go into the investing activities because it's already 'included' in the cash received for the sale. Fourth, it's only use in the indirect method and goes into operating as an adjustment and you have it there as well.
In other words, a gain/loss on a sale of something is ONLY used as an adjustment in the operating section on an indirect method, and that is because it doesn't belong in operating. In a direct method, you aren't starting with net income, so it isn't there to begin with.
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Schedule of Non-Cash Investing & Financing Activities
Cash Dividends Paid 240,000
How can CASH dividends be a non-cash event?
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Net Income 672,000
Adjustments to reconcile net income to net cash provided by operating activities
Interest Expense (144,000)
Interest Expense doesn't belong in indirect. Again, remember you're starting with net income and adjusting stuff. Since interest expense is an operating activity (for the sake of a cash flow anyway), it's already been accounted for in net income, so we don't have to put it in. An indirect method is NOT revenues and expenses. Those are already in the net income.
You basically have three types of adjustments for an indirect method. Again, keep in mind you're starting with net income that includes every revenue, expense, gain and loss in it.
1) Accrued to cash. That is your adjustments for accruals and deferrals, since revenues and expenses don't match cash. You do have an adjustment for the interest payable, the accrued account. That is the same type of adjustment as your other payables. Don't make something special of it just cause it's interest. (You're mixing up with direct method.)
2) Non-cash items such as depreciation. Because cash was never paid for these, they have to be gotten rid of out of net income.
3) Things that don't belong in operating. We take gains and losses out cause they belong in investing (or even financing). If you had a complicated income statement there could be more nasty stuff. You also missed one in this category. Think about what ended up in net income that doesn't belong in operating.