EB-9 (Preparation of Operating Activities Section - Direct Method) Krauss Company's income statement for the year ended December 31, 2008, contained the following condensed information.

Revenue from fees $840,000

Operating expenses (excluding depreciation) $624,000

Depreciation expense 60,000

Loss on sale of equipment 26,000 710,000

Income before income taxes 130,000

Income tax expense 40,000

Net Income 90,000

Krauss's balance sheet contained the following comparitive data at December 31.

2008 2007

Accounts receivable 37,000 54,000

Accounts payable 41,000 31,000

Income taxes payable 4,000 8,500

(Accounts payable pertains to operating expenses)

Instructions:

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