Paris Company presented the following comparative balance sheets at December 31, 2010 and 2011, and the income statement for the year ended December 31, 2011:
Paris Company presented the following comparative balance sheets at December 31, 2010 and 2011, and the income statement for the year ended December 31, 2011:
|
Paris Company Balance Sheets December 31, 2011 and 2010
|
|||
|
|
December 31, 2011 |
|
December 31, 2010 |
|
Assets |
|
|
|
|
Cash |
$ 12,200 |
|
$ 28,200 |
|
Accounts receivable |
16,000 |
|
18,000 |
|
Inventory |
19,500 |
|
22,000 |
|
Prepaid rent |
200 |
|
300 |
|
Total current assets |
$ 47,900 |
|
$ 68,500 |
|
Land |
54,000 |
|
30,000 |
|
Equipment |
75,000 |
|
60,000 |
|
Accumulated depreciation |
(17,000) |
|
(4,000) |
|
Total assets |
$159,900 |
|
$154,500 |
|
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
|
Accounts payable |
$ 13,000 |
|
$ 25,000 |
|
Salaries payable |
2,000 |
|
2,500 |
|
Interest payable |
2,500 |
|
4,000 |
|
Income tax payable |
6,500 |
|
3,000 |
|
Dividends payable |
4,000 |
|
0 |
|
Total current liabilities |
$ 28,000 |
|
$ 34,500 |
|
Long-term notes payable |
10,000 |
|
40,000 |
|
Common stock, $1 par |
30,000 |
|
28,000 |
|
Preferred stock, $4 par |
24,000 |
|
10,000 |
|
Additional paid-in capital |
45,000 |
|
30,000 |
|
Retained earnings |
22,900 |
|
12,000 |
|
Total liabilities and stockholders’ equity |
$159,900 |
|
$154,500 |
|
Paris Company Income Statement For the Year Ended December 31, 2006
|
|||
|
Sales |
|
|
$ 400,000 |
|
Cost of goods sold |
|
|
(250,000) |
|
Gross profit |
|
|
$ 150,000 |
|
General and administrative expenses |
$80,000 |
|
|
|
Salaries expense |
31,000 |
|
|
|
Rent expense |
3,600 |
|
|
|
Depreciation expense |
7,000 |
|
|
|
Total operating expenses |
|
|
(121,600) |
|
Other revenue and expenses: |
|
|
|
|
Gain on sale of land |
$ 3,000 |
|
|
|
Interest revenue |
300 |
|
|
|
Interest expense |
(2,800) |
|
500 |
|
Income before income taxes |
|
|
$ 28,900 |
|
Income tax expense |
|
|
(8,000) |
|
Net income |
|
|
$ 20,900 |
Additional information:
a. The company declared dividends in the amount of $10,000 during the year.
b. Additional land and equipment were purchased for cash.
c. Land that had originally cost $9,000 was sold for $12,000 cash.
d. All accounts payable are related to merchandise purchases.
e. The company uses a perpetual LIFO inventory system and uses straight-line depreciation for all depreciable assets.
Required:
Prepare the entries necessary to prepare the operating activities section of the statement of cash flows using the direct method.