The 2017 and 2018 balance sheets and related income statement of Watson and Holmes Detective Agency follow:

REQUIRED:
Prepare a statement of cash flows under both the direct and indirect methods for 2018.

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2018 2017 BALANCE SHEET ASSETS $ 6,000 $10,000 Cash Accounts receivable 7,000 2,000 (1,000) Less: Allowance for doubtful accounts (500) Inventory 8,000 10,000 Property, plant, and equipment 12,000 11,000 Less: Accumulated depreciation (4,000) (2,000) $32,000 $26,500 Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 5,000 $ 6,000 Unearned revenues 1,000 2,000 Note payable 10,000 10,000 Less: Discount on notes payable (800) (1,000) Common stock 12,000 6,000 Retained earnings 4,800 3,500 Total liabilities and shareholders' equity $32,000 $26,500 2018 2017 INCOME STATEMENT Sales revenues $42,000 Cost of goods sold Depreciation expense (24,000) (2,000) (3,000) (2,000) (9,000) $ 2,000 Interest expense Bad debt expense Miscellaneous expense Net income