Gallery Corporation - Cash Flow Statement

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

$

90,000   

$

80,000   

  Accounts receivable

84,000   

71,000   

  Merchandise inventory

615,000   

520,000   

  Equipment

350,000   

303,000   

  Accum. depreciation—Equipment

(156,000)  

(105,000)  

  Total assets

$

983,000   

$

869,000   

  Liabilities and Equity

  Accounts payable

$

78,000   

$

91,000   

  Income taxes payable

24,000   

21,000   

  Common stock, $2 par value

596,000   

566,000   

  Paid-in capital in excess of par value, common stock

204,000   

159,000   

  Retained earnings

81,000   

32,000   

  Total liabilities and equity

$

983,000   

$

869,000   

GALLEY CORPORATION
Income Statement
For Year Ended December 31, 2011

  Sales

$

1,795,000  

  Cost of goods sold

1,087,000  

  Gross profit

708,000  

  Operating expenses

       Depreciation expense

$

51,000  

       Other expenses

499,000  

550,000  

  Income before taxes

158,000  

  Income taxes expense

24,000  

  Net income

$

134,000  

Additional Information on Year 2011 Transactions

a.

Purchased equipment for $47,000 cash.

b.

Issued 15,000 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 the indirect method. (Amounts to be deducted should be indicated with a minus sign.)