' nces 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. Balance Sheet at December 31 Cash Accounts Receivable Equipment Accumulated Depreciation-Equipment Total Assets Accounts Payable Salaries and Wages Payable Notes Payable (long-term) Common Stock Retained Earnings Total Liabilities and Stockholders' Equity Income Statement Service Revenue Salaries and Wages Expense Depreciation Expense Income Tax Expense Net Incone Additional Data: a. Bought new golf clubs using cash, $1,000. b. Borrowed $1,500 cash from the bank during the year, Current Year Previous Year $ 12,700 1,600 11,000 (2,450) $ 22,850 $1,000 800 2,500 $6,750 3,000 10,000 (2,000) $ 17,750 $ 1,500 1,250 1,000 10,000 10,000 8,550 4,000 $ 22,850 $ 17,750 $ 72,000 65,500 450 1,500 $ 4,550 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 current year ended December 31 using the direct method. TIP: Remember to exclude depreciation expense when converting to the cash basis. (Amounts to be deducted should be indicated with a minus sign.)