Galley Corp., a merchandiser, recently completed its 2011 operations. For the ye
ID: 2375154 • Letter: G
Question
Galley Corp., a merchandiser, recently completed its 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company%u2019s balance sheets and income statement follow.
GALLEY CORPORATION
Comparative Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 213,968 $ 136,584
Accounts receivable 101,308 94,308
Merchandise inventory 706,584 624,384
Equipment 434,964 347,964
Accum. depreciation%u2014Equipment (175,340) (119,240)
Total assets $ 1,281,484 $ 1,084,000
Liabilities and Equity
Accounts payable $ 135,944 $ 71,544
Income taxes payable 31,284 28,184
Common stock, $2 par value 627,200 597,200
Paid-in capital in excess of par value, common stock 242,200 189,700
Retained earnings 244,856 197,372
Total liabilities and equity $ 1,281,484 $ 1,084,000
GALLEY CORPORATION
Income Statement
For Year Ended December 31, 2011
Sales $ 1,866,600
Cost of goods sold 1,157,292
Gross profit 709,308
Operating expenses
Depreciation expense $ 56,100
Other expenses 484,905 541,005
Income before taxes 168,303
Income taxes expense 32,819
Net income $ 135,484
Additional Information on Year 2011 Transactions
a.
Purchased equipment for $87,000 cash.
b.
Issued 15,000 shares of common stock for $5.50 cash per share.
c.
Declared and paid $88,000 in cash dividends.
Required:
Prepare a complete statement of cash flows using a spreadsheet; report operating activities under the indirect method. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
a. Net income was $135,484.
b. Accounts receivable increased.
c. Merchandise inventory increased.
d. Accounts payable decreased.
e. Income taxes payable increased.
f. Depreciation expense was $56,100.
g. Purchased equipment for $87,000 cash.
h. Issued 15,000 shares at $5.50 cash per share.
i. Declared and paid $88,000 of cash dividends.
GALLEY CORPORATION
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2011
December
31, 2010
Analysis of Changes
December
31, 2011
Debit Credit
Balance sheet%u2014debit bal. accounts
Cash $ $ $ $
Accounts receivable
Merchandise inventory
Equipment
$ $
Balance sheet%u2014credit bal. accounts
Accum. depreciation%u2014Equip $ $
Accounts payable
Income taxes payable
Common stock, $2 par value
Paid-in excess of par value, common stock
Retained earnings
$ $
Statement of cash flows
Operating activities
Net income
Increase in accounts receivable
Increase in merch. inventory
Decrease in accounts payable
Increase in income tax payable
Depreciation expense
Investing activities
Payment for equipment
Financing activities
Issued common stock for cash
Paid cash dividends
$ $
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