PA12-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Method) 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. LO 12-2, 12-3, Current Year Previous Year Balance Sheet at December 31 Cash Accounts Receivable Equipment Accumulated Depreciation-Equipment Total Assets $ 6,300 $4,000 900 1,750 5,500 5,000 (1,500) (1,250) $11,200 $9,500 Accounts Payable $ 500 $1,000 Salaries and Wages Payable 500 750 Notes Payable (long-term) 1,700 500 Common Stock 5,000 5,000 Retained Earnings 3,500 2,250 Total Liabilities and Stockholders' Equity $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. 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. 2. Use the statement of cash flows to evaluate the company's cash flows