Assume the same facts as PA12-4, except for the income statement and additional item (a). The new income statement is shown below. Instead of item (a) from PA12-4, assume that the company bought new equipment for $1,800 cash and sold existing equipment for $500 cash. The equipment that was sold was purchased for $1,300 and had Accumulated Depreciation of $250 at the time of sale.

Income Statement for 2017
Lessons Revenue.....................................$37,500
Wages Expense..........................................35,000
Depreciation Expense....................................500
Loss on Disposal of Equipment.....................550
Income Tax Expense.......................................200
Net Income................................................$ 1,250

Required:

1. Prepare the statement of cash flows for the year ended December 31, 2017, using the indirect method.

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