PA12-4 (Algo) Preparing and Interpreting a Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-3, LO 12-4, LO 12-5] 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. 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 Current Year Previous Year $ 6,480 $ 4,360 1,930 990 6,490 (1,680) $ 12,280 $ 410 5,900 (1,340) $ 10,850 $ 1,000 750 410 1,700 500 5,900 5,900 3,860 2,700 $ 12,280 $ 10,850 $ 39,300 36,800 340 1,000 Salaries and Wages Expense Depreciation Expense Income Tax Expense Net Income Additional Data: a. Bought new hockey equipment for cash, $590. b. Borrowed $1,200 cash from the bank during the year. $ 1,160 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. Required: 1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) HEADS UP COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense Changes in Current Assets and Current Liabilities Decrease in Accounts Receivable Decrease in Accounts Payable Decrease in Salaries and Wages Payable Net Cash Provided by Operating Activities Cash Flows from Investing Activities: Cash Payments to Purchase Equipment Net Cash Used in Investing Activities Cash Flows from Financing Activities: Cash Proceeds from Bank Loan Net Cash Provided by Financing Activities Net Increase in Cash during the Year Cash Balance, January 1 Cash Balance, December 31 0 0 0 $ 0