The income statement, balance sheets, and additional information for Video Phones, Inc., are provided.

Additional Information for 2018: 1. Purchase investment in bonds for $100,000. 2. Sell land costing $25,000 for only $17,500, resulting in a $7,500 loss on sale of land. 3. Purchase $55,000 in equipment by issuing a $55,000 long-term note payable to the seller. No cash is exchanged in the transaction. 4. Declare and pay a cash dividend of $22,500.

Required: Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

$ 2,756,000 VIDEO PHONES, INC. Income Statement For the Year Ended December 31, 2018 Net sales Expenses: Cost of goods sold $ 1,700,000 Operating expenses 808,000 Depreciation expense 22,000 Loss on sale of land 7,500 Interest expense 12,500 Income tax expense 43,000 Total expenses 2,593,000 Net income $ 163,000 VIDEO PHONES, INC. Balance Sheet December 31 2018 2017 $ Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investments Land Equipment Accumulated depreciation 172,900 75,500 105,000 9,600 102,700 55,000 130,000 4,800 100,000 205,000 260,000 (63,000) 230,000 205,000 (41,000) Total assets $ 865,000 $ 686,500 $ 61,500 $ 5,500 14,500 76,000 9,000 13,500 Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings 275,000 220,000 250,000 258,500 250,000 118,000 Total liabilities and stockholders' equity $ 865,000 $ 686,500 VIDEO PHONES, INC. Statement of Cash Flows For the Year Ended December 31, 2018 Cash Flows from Operating Activities: Net income $ 163,000 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 22,000 Loss (on sale of land) 7,500 Increase in accounts receivable Decrease in inventory Increase in prepaid rent Decrease in accounts payable Decrease in interest payable Increase in income tax payable $ 192,500 Net cash flows from operating activities Cash Flows from Investing Activities: Purchase investment in bonds Sale of land Net cash flows from investing activities Cash Flows from Financing Activities: Payment of cash dividends Net cash flows from financing activities Net increase in cash Cash at the beginning of the period Cash at the end of the period Note: Noncash Activities Purchase equipment issuing a note payable