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.

2013 2012

Balance Sheet at December 31

Cash ............................................. $13,500 .............. $ 8,000

Accounts Receivable ............................... 2,500 ................ 3,500

Equipment ........................................ 11,000 ............... 10,000

Less: Accumulated Depreciation ............. (3,000) .............. (2,500)

..................................................... $24,000 ............ $19,000

Accounts Payable ............................... $ 1,000 .............. $ 2,000

Wages Payable ..................................... 1,000 ................. 1,500

Long-term Bank Loan Payable .................. 3,000 ................. 1,000

Contributed Capital ................................. 10,000 ............... 10,000

Retained Earnings ..................................... 9,000 ................ 4,500

.......................................................... $24,000 ............. $19,000

Income Statement for 2013

Lessons Revenue .............................. $75,000

Wages Expense ................................. 68,000

Depreciation Expense ............................. 500

Income Tax Expense ............................ 2,000

Net Income .................................... $ 4,500

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 year ended December 31, 2013, using the indirect method.

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