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:
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ch.docxParis Company presented the following comparative balance sheets at December 31, 2010 and 2011, and the income statement for the year ended December 31, 2011:
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Paris Company Balance Sheets December 31, 2011 and 2010
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December 31, 2011 |
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December 31, 2010 |
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Assets |
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Cash |
$ 12,200 |
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$ 28,200 |
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Accounts receivable |
16,000 |
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18,000 |
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Inventory |
19,500 |
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22,000 |
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Prepaid rent |
200 |
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300 |
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Total current assets |
$ 47,900 |
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$ 68,500 |
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Land |
54,000 |
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30,000 |
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Equipment |
75,000 |
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60,000 |
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Accumulated depreciation |
(17,000) |
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(4,000) |
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Total assets |
$159,900 |
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$154,500 |
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Liabilities and stockholders’ equity |
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Accounts payable |
$ 13,000 |
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$ 25,000 |
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Salaries payable |
2,000 |
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2,500 |
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Interest payable |
2,500 |
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4,000 |
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Income tax payable |
6,500 |
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3,000 |
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Dividends payable |
4,000 |
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0 |
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Total current liabilities |
$ 28,000 |
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$ 34,500 |
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Long-term notes payable |
10,000 |
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40,000 |
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Common stock, $1 par |
30,000 |
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28,000 |
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Preferred stock, $4 par |
24,000 |
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10,000 |
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Additional paid-in capital |
45,000 |
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30,000 |
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Retained earnings |
22,900 |
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12,000 |
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Total liabilities and stockholders’ equity |
$159,900 |
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$154,500 |
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Paris Company Income Statement For the Year Ended December 31, 2006
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Sales |
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$ 400,000 |
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Cost of goods sold |
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(250,000) |
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Gross profit |
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$ 150,000 |
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General and administrative expenses |
$80,000 |
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Salaries expense |
31,000 |
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Rent expense |
3,600 |
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Depreciation expense |
7,000 |
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Total operating expenses |
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(121,600) |
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Other revenue and expenses: |
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Gain on sale of land |
$ 3,000 |
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Interest revenue |
300 |
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Interest expense |
(2,800) |
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500 |
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Income before income taxes |
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$ 28,900 |
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Income tax expense |
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(8,000) |
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Net income |
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$ 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.
