Explain the cash payment of taxes

Question

Galley Corp., a merchandiser, recently completed its 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company%u2019s balance sheets and income statement follow.

Comparative Balance Sheets December 31, 2011 and 2010
	2011			2010
Assets
Cash	$	166,000		$	136,000
Accounts receivable		82,000			71,000
Merchandise inventory		615,000			515,000
Equipment		335,000			273,000
Accum. depreciation%u2014Equipment		(156,000)			(101,000)
Total assets	$	1,042,000		$	894,000
Liabilities and Equity
Accounts payable	$	151,000		$	118,000
Income taxes payable		24,000			21,000
Common stock, $2 par value		588,000			564,000
Paid-in capital in excess of par value, common stock		195,000			159,000
Retained earnings		84,000			32,000
Total liabilities and equity	$	1,042,000		$	894,000

GALLEY CORPORATION Income Statement For Year Ended December 31, 2011
Sales				$	1,799,000
Cost of goods sold					1,089,000
Gross profit					710,000
Operating expenses
Depreciation expense	$	55,000
Other expenses		496,000			551,000
Income before taxes					159,000
Income taxes expense					22,000
Net income				$	137,000

Additional Information on Year 2011 Transactions
a.	Purchased equipment for $62,000 cash.
b.	Issued 12,000 shares of common stock for $5 cash per share.
c.	Declared and paid $85,000 in cash dividends.

Required:

Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)