Discuss changes affecting retained earnings are net income

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Reference no: EM131775458

Group B Melba Moncayo and Jonathan Montoya formed a partnership. They have provided the following financial statements and additional information for you to:
(1) prepare a complete statement of cash flows for the year ended December 31, 2015. The cash provided or used by operating activities should be reported using the direct method.

Moncayo and Montoya Company
Balance Sheets
At December 31

 

2015

2014

Assets:

 

 

  Cash

$85,600

$65,200

  Accounts receivable, net

72,850

56,750

  Merchandise inventory

157,750

144,850

  Prepaid expenses

6,080

12,680

  Equipment

280,600

245,600

  Accumulated depreciation-Equipment

 (80,600)

 (97,600)

Total assets

$522,280

$427,480

Liabilities:

 

 

  Accounts payable

$52,850

$45,450

  Income taxes payable

15,240

12,240

  Notes payable (long term)

   59,200

   79,200

Total liabilities

$127,290

$136,890

Equity:

 

 

  Common stock

200,000

150,000

  Paid-in capital in excess of par

53,000

40,000

  Retained earnings

 141,990

   100,590

Total equity

$394,990

$290,590

Total liabilities and equity

$522,280

$427,480

 

Moncayo and Montoya Company
Income Statement
For Year Ended December 31, 2015

Sales

 

$488,000

Cost of goods sold

$212,540

 

Depreciation expense

43,000

 

Other operating expenses

106,260

 

Interest expense

   6,400

(368,200)

Other gains (losses):

 

 

  Gain on sale of equipment

 

   4,700

Income before taxes

 

124,500

Income taxes expense

 

   41,100

Net income

 

$83,400

Additional Information

a. A $20,000 note payable is retired at its carrying value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $120,000 cash.
d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.
e. Prepaid expenses relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.

Reference no: EM131775458

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