Kazaam Company, a merchandiser, recently completed its calendar-year 2011 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. KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010 2011 2010 Assets Cash $ 49,200 $ 73,500 Accounts receivable 65,850 59,000 Merchandise inventory 277,000 253,000 Prepaid expenses 1,000 2,000 Equipment 157,500 107,000 Accum. depreciation?Equipment (42,125) (52,000) Total assets $ 508,425 $ 442,500 Liabilities and Equity Accounts payable $ 60,025 $ 115,000 Short-term notes payable 9,000 7,000 Long-term notes payable 62,500 48,250 Common stock, $5 par value 162,750 150,500 Paid-in capital in excess of par, common stock 36,750 0 Retained earnings 177,400 121,750 Total liabilities and equity $ 508,425 $ 442,500 KAZAAM COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 583,000 Cost of goods sold 287,000 Gross profit 296,000 Operating expenses Depreciation expense $ 20,000 Other expenses 132,000 152,000 Other gains (losses) Loss on sale of equipment 5,750 Income before taxes 138,250 Income taxes expense 25,500 Net income $ 112,750 Additional Information on Year 2011 Transactions a. The loss on the cash sale of equipment was $5,750 (details in b). b. Sold equipment costing $47,250, with accumulated depreciation of $29,875, for $11,625 cash. c. Purchased equipment costing $97,750 by paying $25,000 cash and signing a long-term note payable for the balance. d. Borrowed $2,000 cash by signing a short-term note payable. e. Paid $58,500 cash to reduce the long-term notes payable. f. Issued 2,450 shares of common stock for $18 cash per share. g. Declared and paid cash dividends of $57,100. Required: