The financial statements of Sandhill Ltd., private company reporting under ASPE, follow:

SANDHILL LTD.

Balance Sheet

December 31

Assets2017

2016

Cash$7,877$10,300Short-term notes receivable12,15021,450Accounts receivable27,80013,800Inventory29,30024,800Property, plant, and equipment70,90076,800Accumulated depreciation(29,800)(24,300)Total assets$118,227$122,850Liabilities and Shareholders' EquityAccounts payable$24,800$42,400Income tax payable2,90018,900Notes payable12,5009,400Common shares23,40023,400Retained earnings54,62728,750Total liabilities and shareholders' equity$118,227$122,850

SANDHILL LTD.

Income Statement

Year Ended December 31, 2017

Sales$281,800Cost of goods sold191,900Gross profit89,900Operating expenses$35,950Loss on sale of equipment1,95037,900Profit from operations52,000Other revenues and expensesInterest revenue$(1,060)Interest expense1,950890Profit before income tax51,110Income tax expense15,333Profit$35,777

Additional information:1.Short-term notes receivable are from loans to other companies. During the year, the company collected the outstanding balance at December 31, 2016, and made new loans in the amount of $12,150.2.Equipment was sold during the year. This equipment cost $15,300 originally and had a carrying amount of $8,350 at the time of sale.

3.Equipment costing $9,400 was purchased in exchange for a $9,400 note payable.

4.Depreciation expense is included in operating expenses.

5.Accounts receivable are from the sale of merchandise on credit.

6.Accounts payable relate to the purchase of merchandise on credit.

Prepare the operating section of the cash flow statement using the direct method.