Indirect: Statement of cash flows

Gazelle Corporation, a merchandiser, recently completed its calendar-year 2015 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 company's balance sheets and income statement follow.

GAZELLE CORPORATION

Comparative Balance Sheets

December 31, 2015 and 2014

2015 2014

Assets

Cash $123, 450 $61,550

Accounts Receivable $77,100 $80,750

Inventory $240,600 $250,700

Prepaid expenses $ 15,000 $ 17,000

Total current assets $456, 250 $410,000

Equipment $262,250 $200,000

Accum, depreciationEquipment (110,750) (95,000)

Total assets $607,750 $515,000

Liabilities and Equity

Accounts payable $ 17,750 $102,000

Short-term notes payable $ 15,000 $ 10,000

Total current liabilities $ 32,750 $112,000

Long-term notes payable $100,000 $ 77,500

Total liabilities $132,750 $189,500

Equity

Common stock, $5 par $215,000 $200,000

Paid-in capital in excess

of par, common stock $ 30,000 $ 0

Retained earnings $230,000 $125,500

Total liabilities and equity $607,750 $515,000

GAZELLE CORPORATION

Income Statement

For Year Ended December 31, 2015

Sales $1,185,000

Cost of goods sold $ 595,000

Gross profit $ 590,000

Operating expenses

Depreciation expense $ 38,600

Other expenses $362,850

Total operating expenses $401,450

$188,550

Other gains (losses)

Loss on sale of equipment $ (2,100)

Income before taxes $186,450

Income taxes expense $ 28,350

Net income $158,100

Additional Information on Year 2015 Transactions

a. The loss on the cash sale of equipment was $2,100 (details in b).

b. Sold equipment costing $51,000, with accumulated depreciation of $22,850, for $26,050 cash.

c. Purchased equipment costing $113,250 by paying $43,250 cash and signing a long term note

payable for the balance.

d. Borrowed $5,000 cash by signing a short-term note payable.

e. Paid $47,500 cash to reduce the long-term notes payable.

f. Issued 3,000 shares of common stock for $15 cash per share.

g. Declared and paid cash dividends of $53,600.

Required

1. Prepare a complete statement of cash flows; report its operating activities using the

indirect method. Disclose any noncash investing and financing activities in a note.