Prepare a complete statement of cash flows

Reference no: EM13834553

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's balance sheets and income statement follow.

GALLEY CORPORATION Comparative Balance Sheets December 31, 2011 and 2010
	2011		2010
Assets
Cash	$	213,968	$	136,584
Accounts receivable		101,308		94,308
Merchandise inventory		706,584		624,384
Equipment		434,964		347,964
Accum. depreciation-Equipment		(175,340)		(119,240)

Total assets	$	1,281,484	$	1,084,000

Liabilities and Equity
Accounts payable	$	135,944	$	71,544
Income taxes payable		31,284		28,184
Common stock, $2 par value		627,200		597,200
Paid-in capital in excess of par value, common stock		242,200		189,700
Retained earnings		244,856		197,372

Total liabilities and equity	$	1,281,484	$	1,084,000

GALLEY CORPORATION Income Statement For Year Ended December 31, 2011
Sales			$	1,866,600
Cost of goods sold				1,157,292

Gross profit				709,308
Operating expenses
Depreciation expense	$	56,100
Other expenses		484,905		541,005

Income before taxes				168,303
Income taxes expense				32,819

Net income			$	135,484

*Additional Information on Year 2011 Transactions*
a.	Purchased equipment for $87,000 cash.
b.	Issued 15,000 shares of common stock for $5.50 cash per share.
c.	Declared and paid $88,000 in cash dividends.

Required:

Prepare a complete statement of cash flows using a spreadsheet; report operating activities under the indirect method. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.	Net income was $135,484.
b.	Accounts receivable increased.
c.	Merchandise inventory increased.
d.	Accounts payable decreased.
e.	Income taxes payable increased.
f.	Depreciation expense was $56,100.
g.	Purchased equipment for $87,000 cash.
h.	Issued 15,000 shares at $5.50 cash per share.
i.	Declared and paid $88,000 of cash dividends.

GALLEY CORPORATION Spreadsheet for Statement of Cash Flows For Year Ended December 31, 2011
	December 31, 2010	Analysis of Changes		December 31, 2011
	December 31, 2010	Debit	Credit	December 31, 2011
Balance sheet-debit bal. accounts
Cash	$	$	$	$
Accounts receivable
Merchandise inventory
Equipment

	$			$

Balance sheet-credit bal. accounts
Accum. depreciation-Equip	$			$
Accounts payable
Income taxes payable
Common stock, $2 par value
Paid-in excess of par value, common stock
Retained earnings

	$			$

Statement of cash flows
Operating activities
Net income
Increase in accounts receivable
Increase in merch. inventory
Decrease in accounts payable
Increase in income tax payable
Depreciation expense
Investing activities
Payment for equipment
Financing activities
Issued common stock for cash
Paid cash dividends

		$	$

Reference no: EM13834553

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