Reference no: EM132588383

Drax Corporation has the following financial statements:

Drax Corporation

Income Statement

For the Year Ended December 31, 2020

Net sales                 $165,000

Cost of goods sold       97,500

Gross profit                67,500

Operating expenses     27,500

Income from operations 40,000

Interest expense           3,500

Income before income taxes 36,500

Income taxes                     11,000

Net income                        $ 25,500

Drax Corporation

Comparative Statement of Financial Position

As at December 31

Cash                              $15,000                 $9,750

Accounts receivable          11,750                    8,750

Inventories                          16,500             11,750

Prepaid insurance                  2,500                2,000

Equipment                           25,500           33,500

Accumulated depreciation-equipment (16,250)     (17,750)

Total assets                          $55,000              $48,000

Accounts payable                   $5,000               $6,750

Wages payable                        2,000                 2,000

Income taxes payable                3,000                1,000

Long-term note payable                0                8,750

Common shares                         15,000                15,000

Retained earnings                       30,000             14,500

Total liabilities and shareholders' equity $55,000       $48,000

Additional information:

• Equipment that cost $8,000 was sold for the carrying amount of $3,750
• Dividends declared and paid were $10,000.

Required

Question 1. Prepare the operating activities section for the statement of cash flows using the direct method