The 1996 and 1997 balance sheets and related income statement of Watson and Holmes Detective Agency follow. Prepare a statement of cash flows under both the direct and the indi¬ rect methods for 1997. 1 997 1996 Balance Sheet Assets Cash $10,000 $ 6,000 Accounts receivable 7,000 2,000 Less: Allowance for doubtful accounts (1,000) (500) Inventory 8,000 10,000 Long-lived assets 12,000 11,000 Less: Accumulated depreciation (4,000) (2,000) Total assets $32,000 $26,500 Liabilities and Stockholders’ Equity Accounts payable $ 5,000 $ 6,000 Deferred revenues 1,000 2,000 Long-term note payable 10,000 10,000 Less: Discount on note payable (800) (1,000) Common stock 12,000 6,000 Retained earnings 4,800 3,500 Total liabilities and stockholders’ equity $32,000 $26,500 Income Statement Revenues $42,000 Cost of goods sold (24,000) Depreciation expense (2,000) Interest expense (3,000) Bad debt expense (2,000) Other expense (9,000) Net income $ 2,000