Financial statements of Sierra Ltd are presented as follows:

Sierra Ltd
Statement of Financial Position as at 31 Dec 2016
	$	$	Changes Increase/ Decrease
	2016	2015
Assets
Cash	55 000	38 000	17 000 Increase
Accounts receivables	69 000	27 000	42 000 Increase
Inventory	55 000	----	55 000 Increase
Prepaid expensed	5 000	7 000	2 000 Decrease
Land	46 000	71 000	25 000 Decrease
Equipment	194 000	69 000	125 000 Increase
Accumulated depreciation – equipment	(29 000)	(11 000)	18 000 Increase
Total	395 000	201 000
Liabilities and equity
Accounts payable	24 000	41 000	17 000 Decrease
Accrued expense payable	11 000	----	11 000 Increase
Convertible notes payable	111 000	151 000	40 000 Decrease
Share capital	220 000	60 000	160 000 Increase
Retained earnings	206 000	136 000	70 000 Increase
Total	572 000	388 000

Sierra Ltd
Statement of Profit or Loss
for year ended 31 Dec 2016
	$	$
Sales		885 000
Cost of sales	460 000
Operating Expense	220 000
Interest expense	15 000	695 000
Profit before tax		190 000
Income tax expense		70 000
Profit		120 000

Additional information:

1.  Operating expenses include depreciation expense of $35 000.

2.  Cash dividends of $55 000 were declared and paid in 2016.

3.  Interest expense of $12 000 was paid in cash.

4.  Land was sold at its carrying amount for cash in 2016.

5.  During 2016, equipment with a cost of $170 000 was purchased for cash. Equipment with a cost of $40 000 and carrying amount of $35 000 was sold.

6.  In 2016, convertible notes of $15 000 were redeemed at their carrying amount for cash; convertible notes of $30 000 were converted into ordinary shares issued at $30 000 in total.

7.  Ordinary shares were issues for $120 000 in cash during 2016.

Required:

statement of cash flows using the direct method.