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.

Additional Data:
a. Bought new golf clubs using cash, $ 1,000.
b. Borrowed $ 2,000 cash from the bank during the year.
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 indirect method.
2. Use the statement of cash flows to evaluate the company€™s cash flows.

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Current Year Previous Year Balance Sheet at December 31 Cash Accounts Receivable Equipment $ 8.000 3,500 10,000 $13,500 2,500 11,000 Accumulated Depreciation-Equnt30012.500) $19,000 $24000 Accounts Payable Salaries and Wages Payable Note Payable (long-term) Common Stock Retained Earnings $1,000 1,000 3,000 10,000 $ 2,000 1,500 1,000 10,000 4.500 $19000 $24000 Income Statement $75.000 68.000 Service Revenue Salaries and Wages Expense Depreciation Expense Income Tax Expense Net Income 500 $ 4500