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 | $ 174,000 | $117,000 |
Accounts receivable | 93,000 | 81,000 |
Merchandise inventory | 609,000 | 534,000 |
Equipment | 333,000 | 297,000 |
Accum. depreciation—Equipment . . | (156,000) | (102,000) |
Total assets | $1,053,000 | $927,000 |
Liabilities and Equity |
|
|
Accounts payable | $ 69,000 | $ 96,000 |
Income taxes payable | 27,000 | 24,000 |
Common stock, $2 par value | 582,000 | 558,000 |
Paid-in capital in excess |
|
|
of par value, common stock | 198,000 | 162,000 |
Retained earnings | 177,000 | 87,000 |
Total liabilities and equity | $1,053,000 | $927,000 |
GALLEY CORPORATION Income Statement For Year Ended December 31, 2011 | ||
Sales |
| $1,992,000 |
Cost of goods sold |
| 1,194,000 |
Gross profit |
| 798,000 |
Operating expenses |
|
|
Depreciation expense | $ 54,000 |
|
Other expenses | 501,000 | 555,000 |
Income before taxes |
| 243,000 |
Income taxes expense |
| 42,000 |
Net income |
| $ 201,000 |
Additional Information on Year 2011 Transactions
a. Purchased equipment for $36,000 cash.
b. Issued 12,000 shares of common stock for $5 cash per share.
c. Declared and paid $111,000 in cash dividends.
Required
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method.
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