Use the following financial statements and additional information. SMITH INCORPORATED Comparative Balance Sheets June 30, 2019 and 2018 2019 2018 $ 116,500 68,000 63,000 4,400 251,900 127,000 (33,000) $ 345,900 $ 60,500 53,000 88,000 5,500 207,000 118,000 (11,000) $ 314,000 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity $ 26,000 6,000 3,600 35,600 33,000 68,600 $ 32,000 16,000 4,000 52,000 65,000 117,000 240,000 37,300 $ 345, 900 170,000 27,000 $ 314,000 SMITH INCORPORATED Income Statement For Year Ended June 30, 2019 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 60,000 Other expenses 68,000 Total operating expenses $ 685,000 419,000 266,000 $ 128,000 138,000 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 2,100 140, 100 42,880 $ 97,220 Additional Information a. A $32,000 note payable is retired at its $32,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $59,000 cash. d. Received cash for the sale of equipment that had cost $50,000, yielding a $2,100 gain. e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit. Post-closing SMITH INCORPORATED Statement of Cash Flows (Direct Method) For Year Ended June 30, 2019 Cash flows from operating activities: Cash received from customers $ 670,000 Cash paid for merchandise 427,900 Cash paid for operating expenses 230,900 Cash paid for income taxes $ 1,328,800 Net cash provided by operating activities Cash flows from investing activities: Cash received from sale of equipment Cash paid for equipment Net cash used by investing activities Cash flows from financing activities: Cash received from stock issuance Cash paid to retire notes Cash paid to retire notes Cash paid for dividends Net cash used by financing activities SMITH INCORPORATED Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Income statement items not affecting cash Changes in current operating assets and liabilities Net cash provided by operating activities, using the direct method: $ 1,328,800