For the just completed year, Hanna Company had net income of $140,000. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows:

December 31

End of

Year Beginning of Year

Current assets:

Cash and cash equivalents $ 60,000 $ 78,000

Accounts receivable $ 160,000 $ 180,000

Inventory $ 438,000 $ 343,000

Prepaid expenses $ 11,600 $ 14,400

Current liabilities:

Accounts payable $ 354,000 $ 386,000

Accrued liabilities $ 8,600 $ 12,800

Income taxes payable $ 42,400 $ 35,000

The Accumulated Depreciation account had total credits of $44,000 during the year. Hanna Company did not record any gains or losses during the year.

The company's income statement for the year appears below:

Sales $ 1,050,000

Cost of goods sold 565,000

Gross margin 485,000

Selling and administrative expenses 304,000

Income before taxes 181,000

Income taxes 41,000

Net income $ 140,000

Required:

Using the direct method, convert the company's income statement to a cash basis.