Working backward to the balance sheet at the beginning of the period (Problems 42 through 44 derive from problems by George H. Sorter). The following data relate to the Prima Company.

(1) Exhibit 2.19: Balance sheet at December 31, 2008.

(2) Exhibit 2.20: Statement of net income and retained earnings for 2008

(3) Exhibit 2.21: Statement of cash receipts and disbursements for 2008.

Purchases of merchandise during the period, all on account, were $127,000. All Other Operating Expenses were credited to Prepayments. Prepare a balance sheet for December 31. 2007.

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Prima Company Statement of Net Income and Retained Earnings For Year Ended December 31, 2008 (Problem 42) EXHIBIT 2.20 Sales $200,000 Less Expenses: $130,000 Cost of Goods Sold Depreciation Expense. Taxes Expense 4,000 8,000 Other Operating Expenses Interest Expense Total Expenses 47,700 1,200 ... $190,900 $ 9,100 Net Income... Less Dividends 5,000 Increase in Retained Earnings . $ 4,100 Prima Company Statement of Cash Receipts and Disbursements For Year Ended December 31, 2008 EXHIBIT 2.21 (Problem 42) Cash Receipts Cash Sales..... Collection from Credit Customers.. Total Receipts.... $ 47,000 150,000 $197,000 Cash Disbursements Payment to Suppliers of Merchandise.. Payment to Suppliers of Miscellaneous Services Payment of Taxes Payment of Interest Payment of Dividends $128,000 49,000 7,500 1,200 5,000 Purchase of Marketable Securities 8,000 Total Disbursements $198,700 $ 1,700 Excess of Disbursements over Receipts