Reference no: EM131795880

Problem - Georgia 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.

GEORGIA COMPANY Comparative Balance Sheets December 31, 2011 and 2010
	2011	2010
Assets
Cash	$ 50,000	$ 73,500
Accounts receivable	65,820	50,000
Merchandise inventory	276,000	252,000
Prepaid expenses	1,250	2,000
Equipment	157,500	106,000
Accum. depreciation-Equipment	(30,000)	(40,000)
Total assets	$520,570	$443,500
Liabilities and Equity
Accounts payable	$ 69,395	$113,000
Short-term notes payable	9,000	7,000
Long-term notes payable	60,000	48,750
Common stock, $5 par value	162,500	150,250
Paid-in capital in excess     of par, common stock	36,750	0
Retained earnings	182,925	124,500
Total liabilities and equity	$520,570	$443,500

 

GEORGIA COMPANY Income Statement For Year Ended December 31, 2011
Sales		$584,000
Cost of goods sold		289,000
Gross profit		295,000
Operating expenses
Depreciation expense	$ 20,000
Other expenses	133,200	153,200
Other gains (losses)
Loss on sale of equipment		5,125
Income before taxes		136,675
Income taxes expense		24,250
Net income		$112,425

Additional Information on Year 2011 Transactions

a. The loss on the cash sale of equipment was $5,125 (details in b).

b. Sold equipment costing $46,875, with accumulated depreciation of $30,000, for $11,750 cash.

c. Purchased equipment costing $98,375 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 $62,125 cash to reduce the long-term notes payable.

f. Issued 2,450 shares of common stock for $20 cash per share.

g. Declared and paid cash dividends of $54,000.

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