Assume the same facts as PA12-4, except for the income statement and additional data item (a). The new income statement is shown on the following page. Instead of item (a) from PA12-4, assume that the company bought new equipment for $1,800 cash and sold existing equipment for $500 cash. The equipment that was sold had cost $1,300 and had Accumulated Depreciation of $250 at the time of sale.

Income Statement for 2013

Lessons Revenue .........$37,500

Wages Expense ........... 35,000

Depreciation Expense ....... 500

Loss on Disposal of Equipment ..... 550

Income Tax Expense ........ 200

Net Income ............ $ 1,250

Required:

1. Prepare the statement of cash flows for the year ended December 31, 2013, using the indirect method.

2. Use the statement of cash flows to evaluate the company’s cash flows.