Seaforce Manufacturing Inc.

Income Statement

Year Ended December 31, 20X5

Sale$ 340,000Cost of goods sold$ 250,100Gross Profit$ 89,900Operating Expenses$ 55,000Loss on Sale of equipment$ 2,500$ 57,500Profit from Operations$ 32,400Other expensesInterest Expense$ 3,500Profit before Income Tax$ 28,900Income Tax Expense$ 12,000Profit$ 16,900

Additional Information:

1. Operating expenses include depreciation expense of $10,000

2. Accounts Payable related to the purchase of inventory

3. Equipment that cost $12,500 was sold at a loss of $2,500

4. New equipment was purchased during the year for $8,500

5. Dividends declared and paid in 20X5 totaled $3,000

6. Common shares were sold for $12,000 cash

7. Interest payable in 20X5 was $800 greater than interest payable in 20X4

Seaforce Manufacturing Inc. comparative balance sheet at December 31 20X5

20X520X4Cash$ 6,450$ 4,100Accounts Receivable$ 72,000$ 6,500Inventory$110,250$140,000Prepaid Expenses$ 1,750$ 1,020Equipment$ 96,000$100,000Accumulated Depreciation - equipment($50,000)($42,000)Total Assets$236,450$209,620Account Payable$ 16,230$ 9,900Interest Payable$ 810$ 10Income taxes payable$ 10,800$ 9,500Dividends Payable$ 1,800$ 2,800Long-term Notes Payable$ 55,000$ 62,000Common shares$135,000$123,000Retained Earnings$ 16,310$ 2,410Total Liabilities & Shareholders' Equity$236,450$209,620

What is the total payment for interest when the direct method is used to prepare the cash flow statement?

($4,300)

None of the other alternatives are correct

($3,500)

$3,500

($2,700)