Problem:
Below is the information needed to answer the following question.
Georgia Company, a merchandiser, recently completed its calendar-year 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 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:
2009 2008
Assets
Cash $ 49,400 $ 74,000
Accounts receivable 65,800 59,000
Merchandise inventory 277,500 253,000
Prepaid expenses 1,000 1,900
Equipment 158,500 107,000
Accum. depreciation--Equipment (35,750) (46,000)
Total assets $516,450 $448,900
Liabilities and Equity
Accounts payable $ 54,025 $ 111,000
Short-term notes payable 10,000 8,000
Long-term notes payable 62,500 48,250
Common stock, $5 par value 162,750 151,000
Paid in capital excess par, 35,250 0
common stock
Retained earnings 191,925 130,650
Total liabilities and equity $516,450 $448,900
Year ending 2009 Income Statement
Sales $584,000
Cost of goods sold 287,000
Gross profit 297,000
Operating expenses
Depreciation expense $ 20,000
Other 132,400 152,400
Other gains (losses)
Loss on sale of equipment 5,875
Income before taxes $138,725
Income taxes expense 24,250
Net income $114,475
Additional Information on Year 2009 Transactions
a. The loss on the cash sale of equipment was $5,875 (details in b).
b. Sold equipment costing $47,625, with accumulated depreciation of $30,250, for $11,500 cash.
c. Purchased equipment costing $99,125 by paying $35,000 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 $49,875 cash to reduce the long-term notes payable.
f. Issued 2,350 shares of common stock for $20 cash per share
g. Declared and paid cash dividends of $53,200.