Audio City Inc. is developing its annual financial statements at December 31, 2017. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows:

Additional notes:

a. Bought equipment for cash, $60,000

b. Paid $15,000 on the long-term note payable

c. Issued new shares for $30,000 cash

d. Dividends of $5,000 were paid in cash

e. Other expenses included depreciation, $15,000; wages, $20,000; taxes, $25,000

f. Accounts Payable includes only inventory purchases made on credit. Because a liability relating to taxes does not exist, assume that the taxes were fully paid in cash.

Required:

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

2. Evaluate the statement of cash flows.

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2017 2016 Balance Sheet at December 31 $ 63,000 $ 65,000 Cash 15,000 20,000 Accounts Receivable 22,000 210,000 20,000 Merchandise Inventory Property and Equipment Less: Accumulated Depreciation 150,000 (60,000) (45,000) $250,000 $210,000 $ 8,000 $ 19,000 Accounts Payable Wages Payable Note Payable, Long-Term Contributed Capital Retained Earnings 2,000 1,000 60,000 75,000 70,000 100,000 45,000 80,000 $250,000 $210,000 Income Statement for 2017 $190,000 Sales Cost of Goods Sold 90,000 Other Expenses 60,000 $ 40,000 Net Income