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PA 1 2 - 7 ( Algo ) ( Supplement 1 2 A ) Preparing and Interpreting a Statement of Cash Flows with Loss on

PA12-7(Algo)(Supplement 12A) Preparing and Interpreting a Statement of Cash Flows with Loss on Disposal (Indirect Method)[LO 12-S1]
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 $ 6,600 $ 3,800
Accounts Receivable 8001,550
Equipment 4,0004,000
Accumulated DepreciationEquipment (1,100)(1,150)
Total Assets $ 10,300 $ 8,200
Accounts Payable $ 800 $ 1,200
Salaries and Wages Payable 600750
Notes Payable (long-term)1,600500
Common Stock 4,0004,000
Retained Earnings 3,3001,750
Total Liabilities and Stockholders Equity $ 10,300 $ 8,200
Income Statement
Service Revenue $ 41,500
Salaries and Wages Expense 39,000
Depreciation Expense 400
Loss on Disposal of Equipment 450
Income Tax Expense 100
Net Income $ 1,550
Additional Data:
Bought new equipment for $1,300 cash and sold existing equipment for $400 cash. The equipment that was sold had cost $1,300 and had Accumulated Depreciation of $450 at the time of sale.
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 year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
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