Question

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:

1. 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.
2. Borrowed $1,000 cash from the bank during the year.
3. 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.

Required:

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.)

Answer 1

I Heads up company cash flows stateme cash flows from Operating Actiliesi. F1220 Net Income Adjustment 9 Mon Cash operatery Item Depreciation Expense". Nie loss om disposal of equipment Income Tax Expense operating profit before working capital S 510 asco $210 51280 OSOD 860 S10 2s9o Chane y capit pecrease in Account Recevable Decrease in Account Payable Decrease in salaries and wagent: -2 cash flows from operating Activities before Taxes paid. Tapes said in cash guveated from operating Achitis jf cash flows from Investing Achlutica - - 9380 i | €21850) +1346 Purchare a New Equipment Sale q equipmat. 9510

cash flows from finaning Aéhiches 1000 eq Note Payable Net Increase in cash balance in cash balance in cash balance beginning Ending 9140 16180