1. Petit Company is authorized to issue 1,000,000 shares of its $5 par value common stock and 500,000 shares of its $10 par value 6% preferred stock. The company had $380,000 in the Retained Earnings account throughout the year. Assume that Petit Company had the following transactions during the year 2022.

a. Issued 300,000 shares of common stock for $30 per share

b. Issued 100,000 shares of preferred stock for $50 per share

c. Reacquired 100,000 shares of $5 common stock at $25 per share. (This means we repurchased some of the shares issued in transaction a above).

d. Sold 40,000 shares from the treasury for $27 per share

e. Sold 20,000 shares from the treasury for $23 per share

f. Sold 15,000 shares for $20 per share

2. On November 5, 2022, Petit Company declared a $10,000 cash dividend to shareholders of record as of November 16. The dividend is paid on December 1. Prepare the journal entries (if applicable) for the following dates below. Refer to Chapter 11 Chat slides B11-7 (slides 37 & 38) to assist you.

a. November 5

b. November 16

c. December 1

Using the information above, prepare the Stockholders Equity section of the Balance Sheet for Petit Company on December 31, 2022. Assume that these are the only transactions related to Stockholders Equity. Remember that the dividends declared in part 2 of this problem will reduce Retained Earnings.

Kostas Company reported the following information for the year 2022:

				Kostas Company
				Income Statement
			For the Period Ending December 31, 2022
	Sales						$636,000
	Cost of Goods Sold						240,000
	Gross Profit						396,000
	Office Expenses						242,000
	Depreciation Expense						9,000
	Income from Operations						145,000
	Interest Expense						0
	Income before Income Tax						145,000
	Income tax expense						120,000
	Net Income						$25,000
			Kostas Company
		Comparative Balance Sheets
		December 31, 20XX
					2022		2021
Assets:
	Cash and cash equivalents				$84,000		$48,700
	Accounts Receivable				53,600		50,000
	Inventory				39,600		39,000
	Prepaid Expenses				5,500		15,000
	Equipment				206,000		200,000
	Accumulated Depreciation - Equipment				(126,700)		(117,700)
	Total assets				$262,000		$235,000
Liabilities:
	Accounts Payable				$48,000		$49,000
	Accrued Liabilities				44,000		42,000
Stockholders' Equity:
	Common Stock				10,000		9,000
	Retained Earnings				160,000		135,000
	Total Liabilities & S/H Equity				$262,000		$235,000

Additional information:

1. No equipment was sold throughout the year, so the change in accumulated depreciation results from depreciation expense for the year.

2. Common Stock was issued for cash.

3. Equipment was purchased with cash.

Required:

1. Prepare a FULL statement of cash flows for 2022, including the Operating, Investing, and Financing sections, assuming that Kostas Company uses the INDIRECT method.

2. Can a company have a positive cash flow and negative income? What about positive income and negative cash flow? Explain your answer.