Refer to CP12-4.

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

TIP: Net cash flows provided by operating activities equal $3,000.

TIP: Net cash used in investing activities equals $1,000.

TIP: Net cash provided by financing activities equals $2,000.

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

TIP: Demonstration Case A provides a good example of information to consider when evaluating cash flows.

Required:

Complete requirements 1 and 2 using the direct method.

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2017 2016 Balance Sheet at December 31 Cash $12,000 $ 8,000 Accounts Receivable 2,000 3,500 Equipment Less: Accumulated Depreciation 10,000 (2,500) $19,000 11,000 (3,000) $22,000 $ 1,000 $ 2,000 Accounts Payable Wages Payable Long-Term Bank Loan Payable 1,000 1,500 3,000 1,000 Contributed Capital Retained Earnings 10,000 10,000 7,000 $22,000 4,500 $19,000 Income Statement for 2017 Lessons Revenue $75,000 Wages Expense Depreciation Expense Income Tax Expense 70,000 500 2,000 Net Income $ 2,500