PXE Company presented the following comparative balance sheets at December 31, 2
ID: 2480189 • Letter: P
Question
PXE Company presented the following comparative balance sheets at December 31, 2005 and 2006, and the income statement for the year ended December 31, 2006:
PXE Company
Balance Sheets
December 31, 2006 and 2005
December 31, 2006
December 31, 2005
Assets
Cash
$ 12,200
$ 28,200
Accounts receivable
16,000
18,000
Inventory
19,500
22,000
Prepaid rent
200
300
Total current assets
$ 47,900
$ 68,500
Land
58,000
30,000
Equipment
65,000
60,000
Accumulated depreciation
(11,000)
(4,000)
Total assets
$159,900
$154,500
Liabilities and stockholders’ equity
Accounts payable
$ 13,000
$ 25,000
Salaries payable
2,000
2,500
Interest payable
2,500
4,000
Income tax payable
6,500
3,000
Dividends payable
4,000
0
Total current liabilities
$ 28,000
$ 34,500
Long-term notes payable
10,000
40,000
Common stock, $1 par
30,000
28,000
Preferred stock, $4 par
24,000
10,000
Additional paid-in capital
45,000
30,000
Retained earnings
22,900
12,000
Total liabilities and stockholders’ equity
$159,900
$154,500
PXE Company
Income Statement
For the Year Ended December 31, 2006
Sales
$ 400,000
Cost of goods sold
(250,000)
Gross profit
$ 150,000
General and administrative expenses
$80,000
Salaries expense
31,000
Rent expense
3,600
Depreciation expense
7,000
Total operating expenses
(121,600)
Other revenue and expenses:
Gain on sale of land
$ 3,000
Interest revenue
300
Interest expense
(2,800)
500
Income before income taxes
$ 28,900
Income tax expense
(8,000)
Net income
$ 20,900
Additional information:
a. The company declared dividends in the amount of $10,000 during the year.
b. Additional land and equipment were purchased for cash.
c. Land that had originally cost $9,000 was sold for $12,000 cash.
d. All accounts payable are related to merchandise purchases.
e. The company uses a perpetual LIFO inventory system and uses straight-line depreciation for all depreciable assets.
Required:
1. Prepare the operating activities section of the statement of cash flows using the indirect method.
Net income 20,900
Add: noncash items:
Depreciation 7,000
Gain on sale of land (3,000)
Add: Increase in Current Liabilities
Income Tax payable 3,500
Dividends payable 4,000
Add: decrease in current assets
Inventory 2,500
Accounts receivable 2,000
Prepaid rent 100
Less: Decrease in current liabilities
Accounts payable 12,000
Salaries payable 500
Interest payable 1,500
Cash Flow from Operating Activities 23,000
Salary expense on the books was $43000. Salary payable at the beginning of the year was $11000 and at the end of the year was $12500. How much cash was paid out for salaries?
Rent expense on the books was $15000. Prepaid rent at the beginning of the year was $3000 and at the end of the year was $1250. How much cash was paid out for rent?
Sales revenue on the books was $118000. Accounts receivable at the end of the year was $14000 and accounts receivable at the beginning of the year was $16000. How much cash was received for sales?
Sales revenue on the books was $175000. Unearned revenue at the end of the year was $12000 and unearned revenue at the beginning of the year was $4500. How much cash was received from revenue?
PXE Company
Balance Sheets
December 31, 2006 and 2005
December 31, 2006
December 31, 2005
Assets
Cash
$ 12,200
$ 28,200
Accounts receivable
16,000
18,000
Inventory
19,500
22,000
Prepaid rent
200
300
Total current assets
$ 47,900
$ 68,500
Land
58,000
30,000
Equipment
65,000
60,000
Accumulated depreciation
(11,000)
(4,000)
Total assets
$159,900
$154,500
Liabilities and stockholders’ equity
Accounts payable
$ 13,000
$ 25,000
Salaries payable
2,000
2,500
Interest payable
2,500
4,000
Income tax payable
6,500
3,000
Dividends payable
4,000
0
Total current liabilities
$ 28,000
$ 34,500
Long-term notes payable
10,000
40,000
Common stock, $1 par
30,000
28,000
Preferred stock, $4 par
24,000
10,000
Additional paid-in capital
45,000
30,000
Retained earnings
22,900
12,000
Total liabilities and stockholders’ equity
$159,900
$154,500
Explanation / Answer
Salry Account
To, Bank - cash payment (balancing figure)
Co Balance c/d
41500
12500
By balance b/d
By Income Statement
11000
43000
So, Cash was paid out for salaries = $41,500
Rent Expenses Account
To balance b/b
To Income Statemnet
3000
15000
By Bank - cash payment
By Balance c/d
16750
1250
cash was paid out for rent is $16,750
Sales revenue account (Extract)
To Balance b/d
To Income Statement
16000
118000
By Bank - cash collection(balancing figure)
By Balance c/d
120000
14000
cash was received for sales = $120,000
Cash received from revenue when Sales revenue on the books was $175000, Unearned revenue at the end of the year was $12000 and unearned revenue at the beginning of the year was $4500 = 175000-4500+12000 = $182,500
Dedit CreditTo, Bank - cash payment (balancing figure)
Co Balance c/d
41500
12500
By balance b/d
By Income Statement
11000
43000
total 54000 Total 54000Related Questions
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