ESSAY. Write your answer in the space provided or on aseparate sheet of paper.

12) Nashville Records Company uses the indirect method toprepare its statement of cash flows. Refer to the followingsections of the comparative balance sheet:

                                                                  Nashville Records Company

                                                                   Comparative Balance Sheet

                                                                  December 31, 2018 and 2017

                                                                                             2018                     2017    Increase (Decrease)

AccountsPayable                                                        $6,000                  $9,000                   $(3,000)

AccruedLiabilities                                                         3,000                     1,500                       1,500

Long-term NotesPayable                                        126,000                 135,000                     (9,000)

TotalLiabilities                                                        $135,000               $145,500                 $(10,500)

CommonStock                                                             45,000                     3,000                      42,000

RetainedEarnings                                                      169,500                 111,000                      58,500

TreasuryStock                                                           (12,000)                  (7,500)                       (4,500)

TotalEquity                                                                 202,500                 106,500                      96,000

Total Liabilities and Stockholders'Equity         $337,500               $252,000                    $85,500

Additional information for 2018:

•    No stock was retired.

•    No treasury stock was sold.

•    The company repaid $60,000 of long-termnotes payable.

•    The company borrowed $51,000 on a newlong-term note payable.

•    Net income for the year was $68,000.