Problem - Memphis Corp., a merchandiser, recently completed its 2009 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 Account Payable reflect cash payments for inventory, (5)Other Expense 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.
MEMPHIS COORPOATION Comparative Balance Sheets December 31, 2009 and 2008
Assets 2009 2008
Cash.... $165,000 $137,000
Accounts receivable.... 82,000 74,000
Merchandise inventory..... 620,000 525,000
Equipment........... 345,000 240,000
Accum. Depreciation-equipment. (159,000) (102,000)
Total assets............. $1,053.000 $874,000
Liabilities and Equity
Accounts payable.......... $160,000 $ 96,000
Income taxes payable..... 22,000 19,000
Common stock,$2 par value... 588,000 560,000
Paid-in capital in excess of
par value,common stock....... 201,000 159,000
Retained earnings.......... 82,000 40,000
Total liabilities $1,053,000 $874,000
MEMPHIS CORPORATION Income Statement For Year Ended December 31, 2009
Sales......... $1,794,000
Cost of goods sold........ 1,088,000
Gross profit......... 706,000
Operating expenses
Depreciation expense..... $ 57,000
Other expenses.......... 500,000 557,000
Income before taxes...... 149,000
Income taxes expense...... 22,000
Net income....... $127,000
Additional information on year 2009 Transactions
a. Purchased equipment for $105,000 cash.
b. Issued 14,000 shares of common stock for $5 cash per share.
c. Declared and paid $85,000 in cash dividends.
Required - Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to indirect method.