2.

A Corporation reported net income of $20,000 for 2015. The income statement revealed

Sales of $200,000;

Gross profit of $104,000;

Selling and administrative costs of $68,000;

Interest expense of $4,000;

Income taxes of $12,000

The selling and administrative expenses included $5,000 for depreciation.

No equipment was sold during the year. Equipment purchases were made with cash. Prepaid insurance included in the balance sheet related to administrative costs.

All accounts payable included in the balance sheet relate to inventory purchases.

The change in retained earnings is attributable to net income and dividends.

The increase in common stock and additional paid-in capital is due to issuing additional shares for cash.

Comparative Balance Sheets for a Company follow.

2015 2014

Assets $ $

Current Assets

Cash 91,740 94,290

Accounts receivable (net) 39,850 34,300

Inventory 49,720 55,760

Prepaid Insurance 2,600 2,200

Total Current Assets 183,910 186,550

Land 50,000 50,000

Building and Equipment 300,000 260,000

Less Accumulated Depreciation (41,000) (36,000)

Total Plant Assets 309,000 274,000

Total Assets 492,910 460,550

Liabilities

Current Liabilities

Accounts Payable 17,140 18,680

Interest Payable 2,100 3,000

Income Taxes Payable 4,400 1,600

Total Current Liabilities 23,640 23,280

Stockholders Equity

Common Stock 142,000 140,000

Paid-in Capital in Excess of Par 198,000 180,000

Retained Earnings 129,270 117,270

Total Stockholders Equity 469,270 437,270

Total Liabilities and SHE 492,910 460,550

Prepare Net Cash Flows only from Operating Activities under the Direct method