Presented below are the financial statements of Ortega Company. ORTEGA COMPANY C

Question

Presented below are the financial statements of Ortega Company. ORTEGA COMPANY Comparative Balance Sheets December 31 Assets 2011 2010 Cash $ 24,000 $ 33,000 Accounts receivable 25,000 14,000 Merchandise inventory 41,000 25,000 Property, plant, and equipment $ 70,000 $ 78,000 Less: Accumulated depreciation 27,000 43,000 24,000 54,000 Total $133,000 $126,000 Liabilities and Stockholders' Equity Accounts payable $ 31,000 $ 43,000 Income taxes payable 24,000 20,000 Bonds payable 20,000 10,000 Common stock 25,000 25,000 Retained earnings 33,000 28,000 Total $133,000 $126,000 ORTEGA COMPANY Income Statement For the Year Ended December 31, 2011 Sales $286,000 Cost of goods sold 204,000 Gross profit 82,000 Operating expenses 37,000 Income from operations 45,000 Interest expense 7,000 Income before income taxes 38,000 Income tax expense 10,000 Net income $ 28,000 Additional data: 1. Dividends of $23,000 were declared and paid. 2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale. 3. All depreciation expense, $8,000, is in the operating expenses. 4. All sales and purchases are on account. 5. Additional equipment was purchased for $7,000 cash. Prepare a statement of cash flows

Explanation / Answer

ORTEGA COMPANY Comparative Balance Sheets December 31 Assets 2011 2010 Cash $ 24,000 $ 33,000 Accounts receivable 25,000 14,000 Merchandise inventory 41,000 25,000 Property, plant, and equipment $ 70,000 $ 78,000 Less: Accumulated depreciation 27,000 43,000 24,000 54,000 Total $133,000 $126,000 Liabilities and Stockholders' Equity Accounts payable $ 31,000 $ 43,000 Income taxes payable 24,000 20,000 Bonds payable 20,000 10,000 Common stock 25,000 25,000 Retained earnings 33,000 28,000 Total $133,000 $126,000 ORTEGA COMPANY Income Statement For the Year Ended December 31, 2011 Sales $286,000 Cost of goods sold 204,000 Gross profit 82,000 Operating expenses 37,000 Income from operations 45,000 Interest expense 7,000 Income before income taxes 38,000 Income tax expense 10,000 Net income $ 28,000 Additional data: 1. Dividends of $23,000 were declared and paid. 2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale. 3. All depreciation expense, $8,000, is in the operating expenses. 4. All sales and purchases are on account. 5. Additional equipment was purchased for $7,000 cash. Prepare a statement of cash flows

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