(L02,3) (Preparation of Operating Activities Section—Direct Method) Krauss Company’s income statement for the year ended December 31, 2017, contained the following condensed information.

Service revenue $840,000 Operating expenses (excluding depreciation) $624,000 Depreciation expense 60,000 Loss on sale of equipment 26,000 710,000 Income before income taxes 130,000 Income tax expense 40,000 Net income $ 90,000 Krauss’s balance sheet contained the following comparative data at December 31.

2017 2016 Accounts receivable $37,000 $54,000 Accounts payable 41,000 31,000 Income taxes payable 4,000 8,500

(Accounts payable pertains to operating expenses.)

Instructions Prepare the operating activities section of the statement of cash flows using the direct method.