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 Income Additional Data: a. Bought new golf clubs using cash, $1,100. b. Borrowed $1,700 cash from the bank during the year. Current Year Previous Year $ 13,080 2,000 $ 7,250 12,100 (2,670) $ 24,510 $ 1,200 880 2,700 3,200 11,000 (2,200) $ 19,250 $ 1,700 1,350 1,000 11,000 11,000 8,730 4,200 $ 24,510 $ 19,250 $ 73,200 66,500 470 1,700 $ 4,530 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.) SOFT TOUCH COMPANY Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Cash Flows from Investing Activities: 0