Palm Tree Limited has the following financial statements:

Palm Tree Limited

Income Statement

For the Year Ended December $31,2022$

Net sales $$165,000$

Cost of goods sold $97,500$

Gross profit $67,500$

Operating expenses $27,500$

Income from operations $40,000$

Interest expense $3,500$

Income before income taxes $36,500$

Income Tax $11,000$

Net Income $ $25,500$

Palm Tree Limited

Income Statement

For the Year Ended December $31,2022$

$20222021$

Cash $$15,000$ $$9,750$

Accounts receivable $11,7508,750$

Inventories $16,50011,750$

Prepaid insurance $2,5002,000$

Equipment $25,50033,500$

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

Total assets $$55,000$ $$48,000$

Accounts payable $$5,000$ $$6,750$

Wages payable $2,0002,000$

Income taxes payable $3,0001,000$

Long$-$term note payable $08,750$

Common shares $15,00015,000$

Retained earnings $30,00014,500$

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.$

Required

Prepare the operating activities section for the statement of cash flows using the direct method.