Question

Help Kelley Company's current year income statement, comparative balance sheets, and additional information follow. 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. KELLEY COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 85,700 82.000 284.000 2,300 454,000 201,000 (50,000) $605,000 $ 94,100 63,000 259.000 2,900 419,000 138,000 (59,000) $498,000 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 57,000 18,000 5,000 92.000 167,000 $123,000 11,000 134,000 69,000 203,000 160.000 177,500 52.500 200,000 $605,000 135,000 $ 498,000 KELLEY COMPANY Income Statement For Current Year Ended December 31 Sales cost of goods sold Gross profit $710,000 315,000 395,000

Answer 1

Kelley Company Date Debit Credit Calculation Accounts 31-Dec Cash 1 691,000 -63,000-82,000 19,000 Accounts Receivable Sales 710,000 Income statement 31-Dec Inventory 25,000 2 259,000-284,000 Cost of goods sold Accounts Payable 315,000 Income statement 66,000 =57,000-123,000 Cash 406,000 31-Dec Operating other expenses 162,000 Income statement Prepaid expenses 6002,900-2,300 Cash 161,400 31-Dec Income tax expense 36,000 4 Income statement Cash 36,000 31-Dec Depreciation expense 5 20,000 Income statement Accum. Depreciation-Equipment 20,000 116,000 31-Dec Equipment 6 Cash 38,000 Long term note payable 78,000 31-Dec Cash 7 17,900 Accum. Depreciation-Equipment 29,000 Loss on sale of equipment 6,100 53,000 Equipment 31-Dec Long term note payable 55,000 Cash 55,000 9 31-Dec Cash 7,000 Short term note payable 7,000 31-Dec Cash =3.500*20 10 70,000 Common Stock, $5 par value 17,500 177,500-160,000 Paid in capital in excess of par value, common stock 52,500 11 31-Dec Dividends 97,900 Cash 97,900 31-Dec Sales 12 710,000 Income Summary 710,000 31-Dec Income Summary 13 539,100 Cost of goods sold 315,000 Operating other expenses 162,000 Depreciation expense Loss on sale of equipment 20,000 6,100 Income tax expense 36,000 31-Dec Income Summary 170,900 14 Retained Earnings 170,900

Kelley Company Cashflow Statement - Direct method Calculation Cash flows from from Operating Activities Cash collections from customers 691,000 Cash payments Cash paid to suppliers for Inventory 406,000 Cash paid for Operating other expenses 161,400 Cash paid for Income Taxes 36,000 Total cash payments Net Cash Provided/(Used) by Operating Activities 603,400 87,600 Cash flows from from Investing Activities Proceeds from sale of Equipment 17,900 Purchase of Equipment Net Cash Provided/(Used) by Investing Activities (38,000) (20,100) Cash flows from from Financing Activities Borrowed on short term note payable 7,000 Payment of long term note payable (55,000) Proceeds from issue of common stock =3,500*20 70,000 Dividends paid (97,900) Net Cash Provided/(Used) by Financing Activities Net Change in Cash Cash at Beginning of Period (75,900) (8,400) 94,100 Cash at End of Period 85,700

Workings Cashflow Statement - Direct method Cash flows from from Operating Activities Sales 710,000 Opening Accounts Receivable closing Accounts Receivable Cash collections from customers 63,000 (82,000) 691,000 Cash payments Cost of goods sold 315,000 Opening Accounts Payable 123,000 closing Accounts Payable (57,000) closing Inventory 284,000 (259,000) Opening Inventory Cash paid to Suppliers 406,000 Operating other expenses closing Prepaid expenses 162,000 2,300 Opening Prepaid expenses (2,900) Cash paid for operating other expenses 161,400 Cash paid for Income taxes Total Cash Payments 36,000 603,400 Net Cash Provided/(Used) by Operating Activities 87,600

Kelley Company Cashflow Statement - Indirect method Calculation Cash flows from Operating Activities Net income 170,900 Adjustments to reconcile net income to net cash from operating activities Depreciation expense 20,000 Loss on sale of equipment 6,100 Changes in Working Capital Accounts Receivable (19,000) Increase in current asset decreases cash 63,000-82,000 (25,000) Inventory -259,000-284,000 Prepaid expenses Accounts Payable Net Cash Provided/(Used) by Operating Activities 60 -2,900-2,300 (66,000) Increase in current liabilities increases cash =57,000-123,000 87,600 Cash flows from Investing Activities Proceeds from sale of Equipment Purchase of Equipment 17,900 (38,000) Net Cash Provided/(Used) by Investing Activities (20,100) Cash flows from Financing Activities Borrowed on short term note payable 7,000 Payment of long term note payable (55,000) Proceeds from issue of common stock 70,000 Dividends paid (97,900) Net Cash Provided/(Used) by Financing Activities Net Change in Cash Cash at Beginning of Period (75,900) (8,400) 94,100 Cash at End of Period 85,700