GL1201 - Based on Exercise 12-11 LO P2, P3, A1

SANCHEZ INC. Comparative Balance Sheets June 30, 2019 and 2018

Assets Cash$101,300 $48,900 Accounts receivable, net 68,000 53,000 Inventory 69,000 96,000 Prepaid expenses 5,700 7,100 Total current assets 244,000 205,000 Equipment 179,000 166,000 Accum. depreciationEquipment (45,000) (15,000) Total assets$378,000 $356,000 Liabilities and Equity Accounts payable$33,000 $40,000 Wages payable 7,000 17,000 Income taxes payable 3,600 4,000 Total current liabilities 43,600 61,000 Notes payable (long term) 43,000 85,000 Total liabilities 86,600 146,000 Equity Common stock, $5 par value 250,000 180,000 Retained earnings 41,400 30,000 Total liabilities and equity$378,000 $356,000

SANCHEZ INC. Income Statement For Year Ended June 30, 2019
Sales				$	940,000
Cost of goods sold					575,000
Gross profit					365,000
Operating expenses
Depreciation expense	$	77,000
Other expenses		93,000
Total operating expenses					170,000
					195,000
Other gains (losses)
Gain on sale of equipment					5,200
Income before taxes					200,200
Income taxes expense					61,280
Net income				$	138,920

Additional Information

1. A $43,000 note payable is retired at its $43,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $75,000 cash.
4. Received cash for the sale of equipment that had cost $62,000, yielding a $5,200 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

General Journal tab - Reconstruct the entries to summarize the activity between June 30, 2018 and June 30, 2019.

Direct Method tab - Prepare the Statement of Cash flows for the year ended June 30, 2019 using the direct method.

Indirect Method tab - Prepare the reconciliation to the indirect method.