Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 2

Preparing and Interpreting a Statement of Cash Flows (Indirect Method)
Heads Up Company was started several years ago by two hockey instructors. The company's comparative balance sheets and income statement follow, along with additional information.

Additional Data:
a. Bought new hockey equipment for cash, $500.
b. Borrowed $1,200 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, 2013, using the indirect method.
2. Use the statement of cash flows to evaluate the company's cash flows.