The 2017 and 2016 balance sheets of Watson Corporation follow. The 2017 income statement is also provided. Watson had no noncash investing and financing transactions during 2017. During the year, the company sold equipment for $15,600, which had originally cost $13,100and had a book value of $11,300.The company did not issue any notes payable during the year but did issue common stock for $28,000. The company purchased plant assets and long-term investments with cash.

1. Prepare the statement of cash flows for Watson Corporation for 2017using the indirect method.

2. Evaluate the company's cash flows for the year. Discuss each of the categories of cash flows in your response.

- Income statement Income Statement For the Year Ended December 31, 2017 Sales revenues $ 350,000 77,000 $ 273,000 Less: Cost of goods sold Gross profit Less operating expenses: Salaries and wages expense Depreciation expense $ 27,500 5,200 12,500 45,200 Other operating expenses Total operating expenses Operating income Plus other income and less other expenses: $ 227,800 Interest expense 9,800 4,300 Gain on sale of PP&E Total other income and expenses 5,500 Income before income taxes 222,300 37,000 Less: Income tax expense $ 185,300 Net income Assets 2017 2016 Current assets: Cash 49,000 $ 19,500 32,400 29,700 Accounts receivable Inventory 86,500 3,100 94,600 2,900 Prepaid insurance Total current assets $ 171,000 $ 146,700 156,000 Property, plant, and equipment Less: Accumulated depreciation (30,600) 113,000 135,000 (27,200) 0 Investments $ 409,400 $ 254,500 Total assets Liabilities $ 33,000 $ 36,800 Current liabilities: Accounts payable Wages payable Interest payable 3,300 7,700 2,200 0 Income taxes pavable 5.300 0 3,300 7,700 Wages payable Interest payable Income taxes payable 2,200 0 0 5,300 18,900 Other accrued expenses payable 22,300 Total current liablities $ 62,700 $ 66,800 79,000 111,000 Long-term liabilities Total liabilities $ 141,700 $ 177,800 Stockholders' equity Common stock $ 99,000 $ 168,700 71,000 5,700 Retained earnings $ Total stockholders' equity 267,700 $ 76,700 $ 409,400 $ 254,500 Total liabilities and equity