Question:
Memphis 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 companys balance sheets and income statement follow.
Additional Information on Year 2011 Transactions
a. Purchased equipment for $105,000 cash.
b. Issued 14,000 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.
Transcribed Image Text:
MEMPHIS CORPORATION Comparative Balance Sheets December 31, 201I and 2010 2011 2010 Assets Cash Accounts receivable Merchandise inventory.... quipment Accum. depreciation Equipment .(159,000) (102,000) Total assets.... $ 165,000 $137,000 74,000 620,000 525,000 345,000 240,000 82,000 MEMPHIS CORPORATION Income Statement For Year Ended December 31, 2011 $1,053,000 $874,000 Sales $1,794,000 1,088,000 706,000 Cost of goods sold.. Liabilities and Equity Accounts payable . Income taxes payable Common stock, $2 par value Paid-in capital in excess $160,000 96,000 Gross profit 22,000 9,00 Operating expenses 588,000 560,000 Depreciation expense 57,000 of par value, common stock... Retained earnings.. Total labilties and equity 201,000 59,000 Income before taxes 82,000 40,000 Income taxes expense 49,000 22,000 $ 127.000