Question

Golden Corp.'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, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.

GOLDEN CORPORATION Comparative Balance Sheets December 31
	Current Year						Prior Year
Assets
Cash		$	177,000					$	121,300
Accounts receivable			102,500						84,000
Inventory			620,500						539,000
Total current assets			900,000						744,300
Equipment			370,000						312,000
Accum. depreciation—Equipment			(164,500	)					(110,500	)
Total assets		$	1,105,500					$	945,800
Liabilities and Equity
Accounts payable		$	113,000					$	84,000
Income taxes payable			41,000						31,600
Total current liabilities			154,000						115,600
Equity
Common stock, $2 par value			607,600						581,000
Paid-in capital in excess of par value, common stock			219,400						179,500
Retained earnings			124,500						69,700
Total liabilities and equity		$	1,105,500					$	945,800

  

GOLDEN CORPORATION Income Statement For Current Year Ended December 31
Sales				$	1,857,000
Cost of goods sold					1,099,000
Gross profit					758,000
Operating expenses
Depreciation expense	$	54,000
Other expenses		507,000			561,000
Income before taxes					197,000
Income taxes expense					40,200
Net income				$	156,800

Additional Information on Current Year Transactions

1. Purchased equipment for $58,000 cash.
2. Issued 13,300 shares of common stock for $5 cash per share.
3. Declared and paid $102,000 in cash dividends.

GOLDEN CORPORATION Spreadsheet for Statement of Cash Flows For Current Year Ended December 31 Analysis of Changes December 31, Prior Year Debit Credit December 31, Current Year Balance sheet—debit balance accounts Cash $121,300 $177,000 Accounts receivable 84,000 Inventory 539,000 Equipment 312,000 $1,056,300 Balance sheet—credit balance accounts Accumulated depreciation—Equipment $110,500 Accounts payable 84,000 Income taxes payable 31,600 Common stock, $2 par value 581,000 Paid-in capital in excess of par value, common stock 179,500 Retained earnings 69,700 $1,056,300 Statement of cash flows Operating activities Investing activities Financing activities

Answer 1

For Current Year Ended December 31
		Analysis of Changes
	December 31, Prior Year	Debit	Credit	December 31, Current Year
Balance sheet—debit balance accounts
Cash	$        121,300	$         55,700		$        177,000
Accounts receivable	$         84,000	$         18,500		$        102,500
Inventory	$        539,000	$         81,500		$        620,500
Equipment	$        312,000	$         58,000		$        370,000
	$     1,056,300			$     1,270,000
Balance sheet—credit balance accounts
Accumulated depreciation—Equipment	$        110,500		$         54,000	$        164,500
Accounts payable	$         84,000		$         29,000	$        113,000
Income taxes payable	$         31,600		$           9,400	$          41,000
Common stock, $2 par value	$        581,000		$         26,600	$        607,600
Paid-in capital in excess of par value, common stock	$        179,500		$         39,900	$        219,400
Retained earnings	$         69,700	$       102,000	$       156,800	$        124,500
	$     1,056,300			$     1,270,000

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income		$          156,800
Adjustments
Depreciation	$           54,000
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable	$        (18,500)			=84000-102500
Increase in inventory	$        (81,500)			=539000-620500
Increase in Accounts Payable	$           29,000			=113000-84000
Increase in Income Tax Payable	$             9,400			=41000-31600
Total Adjustments		$            (7,600)
Cash from Operating Activities			$           149,200
Cash flow from Investing Activities
Purchase of Equipment		$          (58,000)
Net cash used In investing activities			$           (58,000)
Cash flow from Financing Activities
Issue of Common Stock		$            66,500		=13300*5
Dividend Paid		$       (102,000)
Net cash used in financing activities			$           (35,500)
Increase in Cash			$             55,700
Opening Balance of Cash			$           121,300
Closing Balance of Cash			$           177,000