Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement follow, along with additional information. Current Year Previous Year Balance Sheet at December 31 Cash $ 6,180 $ 4,140 Accounts Receivable 910 1,770 Equipment 5,620 5,100 Accumulated Depreciation—Equipment (1,510 ) (1,260 ) Total Assets $ 11,200 $ 9,750 Accounts Payable $ 590 $ 1,100 Salaries and Wages Payable 490 750 Note Payable (long-term) 1,500 500 Common Stock 5,100 5,100 Retained Earnings 3,520 2,300 Total Liabilities and Stockholders’ Equity $ 11,200 $ 9,750 Income Statement Service Revenue $ 37,700 Salaries and Wages Expense 35,200 Depreciation Expense 510 Loss on Disposal of Equipment 560 Income Tax Expense 210 Net Income $ 1,220
Additional Data: Bought new equipment for $1,850 cash and sold existing equipment for $510 cash. The equipment that was sold had cost $1,330 and had Accumulated Depreciation of $260 at the time of sale. Borrowed $1,000 cash from the bank during the year. Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that this expense was fully paid in cash.
1. Prepare the statement of cash flows for the year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)