PA$12-6($Algo$)$ Preparing and Interpreting a Statement of Cash Flows $($Direct Method$)[$LO $12-3,$ LO $12-4,$ LO $12-5,$ LO $12-6]$

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

Current Year Previous Year

Balance Sheet at December $31$

Cash $ $6,300$ $ $4,400$

Accounts Receivable $9501,850$

Equipment $6,0505,500$

Accumulated Depreciation$$Equipment $(1,600)(1,300)$

Total Assets $ $11,700$ $ $10,450$

Accounts Payable $ $650$ $ $1,200$

Salaries and Wages Payable $450750$

Notes Payable $($long$-$term$)1,600500$

Common Stock $5,5005,500$

Retained Earnings $3,5002,500$

Total Liabilities and Stockholders$$ Equity $ $11,700$ $ $10,450$

Income Statement

Service Revenue $ $38,500$

Salaries and Wages Expense $36,000$

Depreciation Expense $300$

Income Tax Expense $1,200$

Net Income $ $1,000$

Additional Data:

Bought new hockey equipment for cash, $$550.$

Borrowed $$1,100$ cash from the bank during the year.

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.

Required:

$1.$ 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.$)$