Heads Up Company was started several years ago by two hockey instructors. The companys comparative balance sheets and income statement follow, along with additional information.

Current Year Previous Year

Balance Sheet at December 31

Cash $ 6,300 $ 4,000

Accounts Receivable 900 1,750

Equipment 5,500 5,000

Accumulated DepreciationEquipment (1,500 ) (1,250 ) $ 11,200 $ 9,500

Accounts Payable $ 500 $ 1,000

Salaries and Wages Payable 500 750

Note Payable (long-term) 1,700 500

Common Stock 5,000 5,000

Retained Earnings 3,500 2,250 $ 11,200 $ 9,500

Income Statement

Service Revenue $ 37,500

Salaries and Wages Expense 35,000

Depreciation Expense 250

Income Tax Expense 1,000

Net Income $ 1,250

Additional Data:

a. Bought new hockey equipment for cash, $500.

b. Borrowed $1,200 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 this expense was fully paid in cash.

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