Galley corp a merchandiser recently completed its 2011

Question

 

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
		Debit	Credit
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
		$	$