Hammond Ltd. completed its first year of operations on September 30, 2014. Hammond reported the following information at September 30, 2014: 

                                            HAMMOND LTD.

Selected balance sheet account balances at September 30, 2014

Accounts receivable .............................................................. $23,000

Prepaid expenses ...................................................................... 3,100

Accrued expenses payable .................................................... 10,500

Interest payable ........................................................................... 500

Dividends payable .................................................................... 3,800

Income taxes payable .............................................................. 9,800

Instructions

Assuming that Hammond reports under ASPE, prepare the operating section of a cash flow statement using the direct method.

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HAMMOND LTD. Income Statement Year Ended September 30, 2014 Service revenue $285,000 Operating expenses Depreciation expense Gain on sale of equipment Profit from operations $122,000 12,300 (5,750) 128,550 156,450 Interest expense 4,000 Profit before income tax 152,450 38,500 Income tax expense Profit $113,950