Cash flows from operating activitiesindirect method

Carla Limited had the following financial statements:

Carla Limited

Income Statement

For the Year Ended December 31, 2020

Net sales$165,000

Cost of goodssold97,500

Grossprofit67,500

Operating expenses27,500

Income from operations40,000

Interest expense3,500

Income before income taxes36,500

Income taxes11,000

Net income$25,500

Carla Limited

Comparative Statement of Financial Position

As at December 31

20202019

Cash$15,000$9,750

Accounts receivable11,7508,750

Inventories16,50011,750

Prepaid insurance2,5002,000

Equipment25,50033,500

Accumulated depreciation-equipment(16,250)(17,750)

Total assets$55,000$48,000

Accounts payable$5,000$6,750

Wages payable2,0002,000

Income taxes payable3,0001,000

Long-term note payable08,750

Common shares15,00015,000

Retained earnings30,00014,500

Total liabilities and shareholders' equity$55,000$48,000

Additional information:

Equipment that cost $8,000 was sold for the carrying amount of $3,750.

Dividends declared and paid were $10,000.

Prepare the operating activities section of a statement of cash flows using the indirect method.