Headland Company has not yet prepared a formal statement of cash flows for the 2017 fiscal year. Comparative balance sheets as of December 31, 2016 and 2017, and a statement of income and retained earnings for the year ended December 31, 2017, are presented as follows. HEADLAND COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 ($000 OMITTED) Sales revenue $3,820 Expenses Cost of goods sold $1,190 Salaries and benefits 740 Heat, light, and power 80 Depreciation 90 Property taxes 20 Patent amortization 30 Miscellaneous expenses 10 Interest 30 2,190 Income before income taxes 1,630 Income taxes 815 Net income 815 Retained earnings—Jan. 1, 2017 280 1,095 Stock dividend declared and issued 585 Retained earnings—Dec. 31, 2017 $510 HEADLAND COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 ($000 OMITTED) Assets 2017 2016 Current assets Cash $330 $50 U.S. Treasury notes (available-for-sale) 10 50 Accounts receivable 770 500 Inventory 720 570 Total current assets 1,830 1,170 Long-term assets Land 140 70 Buildings and equipment 900 590 Accumulated depreciation—buildings and equipment (210 ) (120 ) Patents (less amortization) 110 140 Total long-term assets 940 680 Total assets $2,770 $1,850 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $413 $320 Income taxes payable 42 30 Notes payable 330 330 Total current liabilities 785 680 Long-term notes payable—due 2019 200 200 Total liabilities 985 880 Stockholders’ equity Common stock 1,275 690 Retained earnings 510 280 Total stockholders’ equity 1,785 970 Total liabilities and stockholders’ equity $2,770 $1,850 Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold.