330 Chapter 12: The Statement of Cash Flows Critical Thinking Review the information in Exercises 2 and 4. Calculate the same answer using a different approach. Demonstration Problems Demonstration Problem #1 The income statement, schedule of current account changes, and additional data for Village Books follows: Village Books Income Statement For the Year Ended December 31, 2005 Income Statement For the Year Ended December 31, 2005 $3,512,500 67,500 $3,580,000 Revenues: Net sales revenue Dividend revenue Expenses: Cost of goods sold Salary expense Other operating expense Depreciation expense Interest expense Amortization expense-patents Net income 2,702,500 322,500 77,500 137,500 162,500 12,500 3,415,000 $165,000 Additional data: a. Collections exceeded sales by $17,500. b. Dividend revenue equaled cash amounts received, $67,500. c. Payments to suppliers were $45,000 less than cost of goods sold. Payments for other operating expense and interest expense were the same as 'Other operating expense' and 'Interest expense'. Payments to employees were less than salary expense by $10,000. e. Acquisition of plant assets totaled $325,000. Of this amount, $50,000 was paid in cash and the balance was financed by signing a note payable. f. Proceeds from the sale of land were $212,500. g. Proceeds from the issuance of common stock were $125.000. h. Full payment was made on a long-term note payable, $100,000. Chapter 12: The Statement of Cash Flows 331 Dividends were paid in the amount of $40,000. A small parcel of land located in an industrial park was purchased for $185,000. Current asset and liability activity changes were as follows: Cash and cash cquivalents Accounts receivable Inventory Prepaid expense Accounts payable Salary payable Income tax payable December 31 2005 2004 580,00 230,000 590,00 607,500 945,00 960,000 30,000 30,000 535,00 505,000 27,500 17,500 8.000 8.000