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

Dec. 31, 2016 Dec. 31, 2015 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 643,400 $ 679,400 Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566,800 547,400 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,011,000 982,800 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 240,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,000 0 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 880,000 680,000 Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (244,400) (200,400)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,376,800 $2,929,200 Liabilities and Stockholders’ Equity Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . . . . . . $ 771,800 $ 748,400 Accrued expenses payable (operating expenses) . . . . . . . . . . . . . . . . . . 63,400 70,800 Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800 6,400 Common stock, $2 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,000 32,000 Paid-in capital: Excess of issue price over par—common stock . . . . . . 408,000 192,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,068,800 1,879,600 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . $3,376,800 $2,929,200 The income statement for the year ended December 31, 2016, is as follows:

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,980,000 Cost of merchandise sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,452,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,528,000 Operating expenses:

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,000 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100,000 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,144,000 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 384,000 Other expense:

Loss on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000)

Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,000 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,800 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,200 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.

ns Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.
Statement of cash flows—direct method applied to OBJ. 3 The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is as follows:
Dec. 31, 2016 Dec. 31, 2015 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 625,760 $ 585,920 Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,840 208,960 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641,760 617,120 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 240,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,000 0 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705,120 553,120 Accumulated depreciation—equipment . . . . . . . . . . . . . . . . . . . . . . . . . (166,400) (148,000)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,362,080 $2,057,120 Liabilities and Stockholders’ Equity Accounts payable (merchandise creditors) . . . . . . . . . . . . . . . . . . . . . . . $ 424,480 $ 404,960 Accrued expenses payable (operating expenses) . . . . . . . . . . . . . . . . . 42,240 52,640 Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000 19,200 Common stock, $2 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 100,000 Paid-in capital: Excess of issue price over par—common stock . . . . . 417,500 280,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,303,860 1,200,320 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . $2,362,080 $2,057,120 The income statement for the year ended December 31, 2016, is as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,372,559 Cost of merchandise sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,306,190 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,066,369 Operating expenses:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,400 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,402 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,773,802 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292,567 Other income:
Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 332,567 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,027 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199,540 Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

a. The investments were sold for $280,000 cash.

b. Equipment and land were acquired for cash.

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

d. The common stock was issued for cash.

e. There was a $96,000 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.