Kate Middleton Company, a merchandiser, recently completed its


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Kate Middleton 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. KATE MIDDLETON COMPANY Comparative Balance Sheets December 31, 2011 and 2010 2011 2010 Assets Cash $ 49,000 $ 73,000 Accounts receivable 65,900 58,000 Merchandise inventory 275,000 252,000 Prepaid expenses 1,000 1,800 Equipment 158,500 106,500 Accum. depreciation—Equipment (30,125) (40,000) Total assets $ 519,275 $ 451,300 Liabilities and Equity Accounts payable $ 42,025 $ 111,000 Short-term notes payable 12,000 6,000 Long-term notes payable 70,000 49,000 Common stock, $5 par value 162,250 150,250 Paid-in capital in excess of par, common stock 36,000 0 Retained earnings 197,000 135,050 Total liabilities and equity $ 519,275 $ 451,300 KATE MIDDLETON COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 582,500 Cost of goods sold 285,000 Gross profit 297,500 Operating expenses Depreciation expense $ 20,000 Other expenses 133,600 153,600 Other gains (losses) Loss on sale of equipment 5,500 Income before taxes 138,400 Income taxes expense 24,250 Net income $ 114,150 Additional Information on Year 2011 Transactions a. The loss on the cash sale of equipment was $5,500 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $29,875, for $11,500 cash. c. Purchased equipment costing $98,875 by paying $35,000 cash and signing a long-term note payable for the balance. d. Borrowed $6,000 cash by signing a short-term note payable. e. Paid $42,875 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 $52,200. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the “$” sign in your response.) ***SEE UPLOADED FILE ATTACHED*** ATTACHMENT PREVIEW Download attachment Screen Shot 2013-08-07 at 4.48.26 PM.png seatown1234
posted a question · Aug 07, 2013 at 6:49pm

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