Indirect method:

Additional information: 1.) Operating expenses are composed of: Depreciation $12,000; Salaries $50,000; Loss on Sale of Equipment $9,000; other operating expenses $64,000. 2.) Other operating expenses are cash expenses. 3.) Equipment was purchased during the year for $135,000 cash. 4.) Equipment was sold for cash during the year. The original cost of the equipment was $60,000, and the accumulated depreciation was $45,000. 5.) Dividends were declared and paid during the year