CP12-7 (Algo) (Supplement 12A) Preparing and Interpreting a Statement of Cash Flows with Loss on Disposal (Indirect Method) [LO 12-S1] 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 Accounts Receivable $ 12,740 1,800 12,600 (2,180) Equipment $ 7,000 3,100 12,000 (2,100) $ 20,000 Accumulated Depreciation-Equipment Total Assets $ 24,960 Accounts Payable $ 1,100 $1,600 Salaries and Wages Payable 1,300 Notes Payable (long-term) 840 2,600 12,000 1,000 Common Stock 12,000 Retained Earnings 8,420 4,100 Total Liabilities and Stockholders' Equity $ 24,960 $ 20,000 Income Statement Service Revenue $ 72,600 Salaries and Wages Expense 66,000 Depreciation Expense 720 Loss on Disposal of Equipment 360 Income Tax Expense 1,200 Net Income $ 4,320 Additional Data: a. Bought new golf clubs for $2,600 cash and sold existing clubs for $1,000 cash. The clubs that were sold had cost $2,000 and had Accumulated Depreciation of $640 at the time of sale. b. Borrowed $1,600 cash from the bank during the year. c. 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 year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) SOFT TOUCH COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Changes in Current Assets and Current Liabilities Cash Flows from Investing Activities: Cash Flows from Financing Activities: Next >