Assume the same facts as CP12- 4, except for additional data item (a) and the income statement. Instead of item (a) from CP12- 4, assume that the company bought new golf clubs for $ 3,000 cash and sold existing clubs for $ 1,000 cash. The clubs that were sold had cost $ 2,000 and had Accumulated Depreciation of $ 500 at the time of sale. The corrected income statement follows.
Income Statement
Service Revenue…………………………. $ 75,000
Salaries and Wages Expense……………… 68,000
Depreciation Expense……………………… 1,000
Loss on Disposal of Equipment……………… 500
Income Tax Expense……………………….. 1,000
Net Income………………………………. $ 4,500
Required:
1. Prepare the statement of cash flows for the year ended December 31 using the indirect method.
2. Use the statement of cash flows to evaluate the company’s cash flows.