A company completed its income statement and balance sheet for the year and provided the following information: Income Statement Service Revenue $55,000 Expenses: Salaries 42,500 Rent 7,200 Depreciation 6,800 Amortization of copyrights 1,000 Total Expenses 57,500 Net loss $(2,500) Partial Balance Sheet Current Year Prior Year Accounts receivable $ 7,000 $16,000 Salaries Payable 14,000 7,200 Prepaid rent 2,200 8,400 In addition, the company bought a small piece of equipment costing $6,500. Required: 1. Prepare the operating activities section of the statement of cash flows using the indirect method. 2. Explain why the company was able to report positive operating cash flow despite having a net loss for the year.

A company completed its income statement and balance sheet for the year and provided the following information: Income Statement Service Revenue Expenses: Salaries Rent Depreciation Amortization of copyrights Total Expenses Net loss $55,000 42,500 7,200 6,800 1,000 57,500 $(2,500) Partial Balance Sheet Accounts receivable Salaries Payable Prepaid rent Current Year Prior Year $ 7,000 $16,000 14,000 7,200 2,200 8,400 In addition, the company bought a small piece of equipment costing $6,500. Required: 1. Prepare the operating activities section of the statement of cash flows using the indirect method. 2. Explain why the company was able to report positive operating cash flow despite having a net loss for the year