Drake Company, a merchandiser, recently completed its calendar-year 2017 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, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The companys income statement and balance sheets follow.

Additional Information on Year 2017 Transactions

1. The loss on the cash sale of equipment was $7,500 (details in b).
2. Sold equipment costing $71,000, with accumulated depreciation of $43,000, for $20,500 cash.
3. Purchased equipment costing $153,000 by paying $42,000 cash and signing a long-term note payable for the balance.
4. Borrowed $7,000 cash by signing a short-term note payable.
5. Paid $85,000 cash to reduce the long-term notes payable.
6. Issued 4,900 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $201,500.

Using the income statement, the comparative balance sheet, and the additional information given above, reconstruct the entries for the summarized activity of the current fiscal year. Upon completion, the trial balance tab should agree with the December 31, 2017 balances.

1. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

2. Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any. Notes were not issued for the purchase of inventory.

3. Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.

4.Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.

5. Reconstruct the journal entry for the sale of equipment at a loss, incorporating the change in the related balance sheet account(s), if any.

6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

7. Reconstruct the entry for the purchase of new equipment.

8. Reconstruct the entry for the issuance of the short-term note payable.

9. Reconstruct the entry for the payment on the long-term note payable.

10. Reconstruct the entry for the issuance of common stock.

11.Reconstruct the entry to record the payment of cash dividends.

12. Close the revenue account(s) to income summary.

13. Close the expense and loss accounts to income summary.

14. Close Income Summary to Retained Earnings.

Prepare the Statement of Cash flows for the year ended December 31, 2017

using the Direct Method. Hint Use the Cash T-account on the General Ledger tab to identify the sources and uses of cash. List cash outflows as negative values.

Prepare the operating activities section of the statement of cash flows using the indirect method. Enter reductions to net cash provided by operating activities as negative values.

DRAKE COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 $ 69,500 69,000 288,000 3,400 429,900 262,000 (60,000) $631,900 $ 74,700 53,000 263,000 4,300 395,000 180,000 (77,000) $ 498,000 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, Retained earnings Total liabilities and equity $ 58,900 17,000 75,900 105,000 180,900 $ 127,000 10,000 137,000 79,000 216,000 common stock 174,500 73,500 203,000 $631,900 150,000 0 132,000 $ 498,000 $936,000 359,000 577,000 DRAKE COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 26,000 Other expenses 213,000 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense 239,000 (7,500) 330,500 58,000 $ 272,500 Net income DRAKE COMPANY Statement of Cash Flows (Direct Method) For Year Ended December 31, 2017 Cash flows from operating activities: Cash received from customers $ 920,000 Cash paid for merchandise (452,100) Cash paid for income taxes (212,100) X Cash paid for operating expenses (58,000) X $ 197,800 Net cash provided by operating activities Cash flows from investing activities: Cash received from sale of equipment Cash paid for equipment 20,500 (42,000) (21,500) Net cash used by investing activities Cash flows from financing activities: Cash received from the issuance of short-term notes Cash paid on long-term notes Cash received from stock issuance Cash paid for dividends 98,000 X (201,500) X 7,000 X (85,000) X $ Net cash used by financing activities Net decrease in cash Cash balance at prior year-end Cash balance at current year-end (181,500) (5,200) 74,700 69,500 $ DRAKE COMPANY Statement of Cash Flows (Indirect Method) For Year Ended December 31, 2017 Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Net cash provided by operating activities, using the direct method: $ 197,800