Kazaam company a merchandiser recently completed its

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Reference no: EM13572681

Kazaam Company, a merchandiser, recently completed its calendar-year 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, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheets and income statement follow.

KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010
	2011		2010
Assets
Cash	$	49,200	$	74,000
Accounts receivable		65,800		58,000
Merchandise inventory		275,000		253,000
Prepaid expenses		1,000		1,800
Equipment		157,000		107,500
Accum. depreciation-Equipment		(35,375)		(46,000)

Total assets	$	512,625	$	448,300

Liabilities and Equity
Accounts payable	$	45,075	$	111,000
Short-term notes payable		9,000		7,000
Long-term notes payable		70,000		48,750
Common stock, $5 par value		162,500		150,500
Paid-in capital in excess of par, common stock		36,000		0
Retained earnings		190,050		131,050

Total liabilities and equity	$	512,625	$	448,300

KAZAAM COMPANY Income Statement For Year Ended December 31, 2011
Sales			$	582,000
Cost of goods sold				283,000

Gross profit				299,000
Operating expenses
Depreciation expense	$	20,000
Other expenses		134,000		154,000

Other gains (losses)
Loss on sale of equipment				5,000

Income before taxes				140,000
Income taxes expense				23,000

Net income			$	117,000

Additional Information on Year 2011 Transactions
a.	The loss on the cash sale of equipment was $5,000 (details in b).
b.	Sold equipment costing $47,250, with accumulated depreciation of $30,625, for $11,625 cash.
c.	Purchased equipment costing $96,750 by paying $25,000 cash and signing a long-term note payable for the balance.
d.	Borrowed $2,000 cash by signing a short-term note payable.
e.	Paid $50,500 cash to reduce the long-term notes payable.
f.	Issued 2,400 shares of common stock for $20 cash per share.
g.	Declared and paid cash dividends of $58,000.

Required:
1.	Prepare a complete statement of cash flows; report its operating activities using the indirect method.

Reference no: EM13572681

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