Galley Corp., a merchandiser, recently completed its 2011 operations. For the ye

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.

  

  

Purchased equipment for $62,000 cash.

Issued 12,000 shares of common stock for $5 cash per share.

Declared and paid $85,000 in cash dividends.

    

Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

  

Comparative Balance Sheets
December 31, 2011 and 2010 2011 2010   Assets   Cash $ 166,000    $ 136,000      Accounts receivable 82,000    71,000      Merchandise inventory 615,000    515,000      Equipment 335,000    273,000      Accum. depreciation%u2014Equipment (156,000)   (101,000)     Total assets $ 1,042,000    $ 894,000      Liabilities and Equity   Accounts payable $ 151,000    $ 118,000      Income taxes payable 24,000    21,000      Common stock, $2 par value 588,000    564,000      Paid-in capital in excess of par value, common stock 195,000    159,000      Retained earnings 84,000    32,000      Total liabilities and equity $ 1,042,000    $ 894,000   

Explanation / Answer

Operating activity

income 137000

add:depreciation 55000

less account receivable (11000)

inventory (100000)

Add:accounts payable 33000

income tax payable 3000

total 117000

Investing activity

Equipment (62000)

Total (62000)

Financing activity

stock 60000

Less dividend (85000)

Total -25000

add:begining cash 136000

so, ending cash 166000

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