Statement of cash flows—direct method OBJ. 3 The comparative balance sheet of Martinez Inc. for December 31, 2016 and 2015, is as follows:

Dec. 31, 2016 Dec. 31, 2015 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 661,920 $ 683,100 Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992,640 914,400 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,400 1,363,800 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 432,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 960,000 0 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,224,000 984,000 Accumulated depreciation—equipment . . . . . . . . . . . . . . . . . . . . . (481,500) (368,400)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,751,460 $4,008,900 Liabilities and Stockholders’ Equity Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . $1,080,000 $ 966,600 Accrued expenses payable (operating expenses) . . . . . . . . . . . . . 67,800 79,200 Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,800 91,200 Common stock, $5 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000 30,000 Paid-in capital: Excess of issue price over par—common stock . . . . . 950,000 450,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,422,860 2,391,900 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . $4,751,460 $4,008,900 The income statement for the year ended December 31, 2016, is as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,512,000 Cost of merchandise sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,352,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,160,000 Operating expenses:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 113,100 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344,840 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,457,940 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 702,060 Other income:
Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,000 Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 858,060 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,100 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 558,960 Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

a. Equipment and land were acquired for cash.

b. There were no disposals of equipment during the year.

c. The investments were sold for $588,000 cash.

d. The common stock was issued for cash.

e. There was a $528,000 debit to Retained Earnings for cash dividends declared.
Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.