GL1202 - Based on Problem 12-3A LO A1, P2, P3 Pelcher Company's current year income statement, comparative balance sheets, and additional information follow. 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. PELCHER COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 76,000 77,000 279,000 3,100 435, 100 245,000 (60,000) $620,100 $ 80,100 59,000 255,000 3,900 398,000 168,000 (72,000) $494,000 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, common stock Retained earnings Total liabilities and equity $ 55,100 18,000 73,100 79,000 152,100 $119,000 11,000 130,000 59,000 189,000 192,500 67,500 208,000 $620,100 170,000 0 135,000 $ 494,000 $865,000 345,000 520,000 PELCHER COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 25,000 Other expenses 197,000 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 222,000 (7,100) 290,900 51,000 $ 239,900 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $7,100 (details in b). b. Sold equipment costing $64,000, with accumulated depreciation of $37,000, for $19,900 cash. c. Purchased equipment costing $141,000 by paying $34,000 cash and signing a long-term note payable for the balance. d. Borrowed $7,000 cash by signing a short-term note payable. e. Paid $87,000 cash to reduce the long-term notes payable. f. Issued 4,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $166,900. Journal entry worksheet Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any. Note: Enter debits before credits. Date Account Title Debit Credit Dec 31 Cash Record entry Clear entry View general journal Unadjusted Dates: Dec 31 PELCHER COMPANY Statement of Cash Flows (Direct Method) For Current Year Ended December 31 Cash flows from operating activities: Cash received from customers $ 847,000 (432,900) (196,200) (51,000) $ 166,900 Cash flows from investing activities: (34,000) 19,900 (14,100) Cash flows from financing activities: 90,000 (87,000) (14,100) Cash flows from financing activities: 90,000 (87,000) (166,900) Net decrease in cash $ (163,900) (11,100) 80,100 69,000 Cash balance at prior year-end Cash balance at current year-end PELCHER COMPANY Statement of Cash Flows (Indirect Method) For Current Year Ended December 31 Cash flows from operating activities: Net income $ 239,900 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on sale of equipment 25,000 7,100 800 Increase in inventory Decrease in accounts payable (18,000) (24,000) (63,900) (73,000) 166,900 Net cash provided by operating activities $ Net cash provided by operating activities, using the direct method: $ 166,900 Congratulations! You have successfully reconciled the two methods
