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Seaforce Manufacturing Inc. Income Statement Year Ended December 31, 20X5 Sale $ 340,000 Cost of goods sold $ 250,100 Gross Profit $ 89,900 Operating Expenses

Seaforce Manufacturing Inc. Income Statement Year Ended December 31, 20X5

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

20X5 20X4
Cash $ 6,450 $ 4,100
Accounts Receivable $ 72,000 $ 6,500
Inventory $110,250 $140,000
Prepaid Expenses $ 1,750 $ 1,020
Equipment $ 96,000 $100,000
Accumulated Depreciation - equipment ($50,000) ($42,000)
Total Assets $236,450 $209,620
Account Payable $ 16,230 $ 9,900
Interest Payable $ 810 $ 10
Income taxes payable $ 10,800 $ 9,500
Dividends Payable $ 1,800 $ 2,800
Long-term Notes Payable $ 55,000 $ 62,000
Common shares $135,000 $123,000
Retained Earnings $ 16,310 $ 2,410
Total Liabilities & Shareholders' Equity $236,450 $209,620

What where the proceeds of the sale of the machinery when the indirect method is used to prepare the cash flow statement?

1. ($500)

2. None of the other alternatives are correct

3. $12,000

4. $8,000

5. $2,000

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