Question

Soft Touch Company was started several years ago by two golf instructors. The company’s comparative balance sheets and income statement are presented below, along with additional information.

	Current Year			Previous Year
Balance Sheet at December 31
Cash	$	15,000		$	10,500
Accounts Receivable		3,300			4,500
Equipment		12,100			11,000
Accumulated Depreciation—Equipment		(4,100	)		(3,500	)
Total Assets	$	26,300		$	22,500
Accounts Payable	$	2,000		$	3,000
Salaries and Wages Payable		1,400			2,000
Note Payable (long-term)		4,000			1,000
Common Stock		11,000			11,000
Retained Earnings		7,900			5,500
Total Liabilities and Stockholders’ Equity	$	26,300		$	22,500
Income Statement
Service Revenue	$	79,000
Salaries and Wages Expense		73,000
Depreciation Expense		600
Income Tax Expense		3,000
Net Income	$	2,400

Additional Data:

1. Bought new golf clubs using cash, $1,100.
2. Borrowed $3,000 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 Income Tax Expense was fully paid in cash.

Required:
1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1