Heads Up Company was started several years ago by two hockey instructors. The company?s comparative balance sheets and income statement appear on the next page, along with additional information.

Additional notes:

a. Bought new hockey equipment for cash, $500

b. Borrowed $1,000 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 this expense was fully paid in cash.

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.

Transcribed Image Text:

2017 2016 Balance Sheet at December 31 $ 6,000 $4,000 Cash Accounts Receivable 1,000 1,750 5,000 Equipment 5,500 (1,500) Less: Accumulated Depreciation (1,250) $ 11,000 $9,500 $ 500 $1,000 Accounts Payable Wages Payable Long-Term Bank Loan Payable Contributed Capital Retained Earnings 500 750 1,500 500 5,000 5,000 3,500 2,250 $ 11,000 $9,500 Income Statement for 2017 $ 37,500 Lessons Revenue Wages Expense 35,000 Depreciation Expense Income Tax Expense 250 1,000 $ 1,250 Net Income