Refer to the data for Novations, Inc., in Problem 47.

..................................................... Debits Dec. 31, 2013 .................. Jan. 1, 2013

Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . $176,400 ................... $ 58,000

Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000 ....................... 26,600

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 ...................... 25,400

Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 ....................... 4,000

Long-Term Investments (at cost) . . . . . . . . . . . . . . . . . . . . . . 6,000 ..................... 16,800

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 ................... 66,000

Treasury Stock (at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 ................... 20,000

Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,000

Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000

Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,600

Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000

Total debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $922,600 ................... $216,800

....................................................... Credits Dec. 31, 2013 ................ Jan. 1, 2013

Accumulated Depreciation-Equipment . . . . . . . . . . . . . . $ 19,000 ..................... $ 18,000

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 ........................ 11,200

Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 ......................... 2,000

Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 ....................... 8,000

Notes Payable-Long-Term . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000 ..................... 24,000

Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 .................. 100,000

Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . 32,000 .................... 30,000

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,600* ................... 23,600

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704,000

Gain on Sale of Long-Term Investments . . . . . . . . . . . . . . . . . . . 2,000

Total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $922,600 ................. $216,800

* Preclosing balance.

The following additional information is available:

(a) All purchases and sales were on account.

(b) Equipment costing $10,000 was sold for $3,000; a loss of $1,000 was recognized on the sale.

(c) Among other items, the operating expenses included depreciation expense of $7,000; interest expense of $2,800; and insurance expense of $2,400.

(d) Equipment was purchased during the year by issuing common stock and by paying the balance ($12,000) in cash.

(e) Treasury stock was sold for $4,000 less than it cost; the decrease in owners' equity was recorded by reducing Retained Earnings. No dividends were paid during the year.

Instructions:

1. Prepare an income statement for Novations, Inc., for the year ended December 31, 2013.

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