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%u2019s balance sheets and income statement follow. KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010 2011 2010 Assets Cash $ 49,200 $ 74,000 Accounts receivable 65,810 55,000 Merchandise inventory 276,000 251,000 Prepaid expenses 1,500 1,900 Equipment 159,000 107,500 Accum. depreciation%u2014Equipment (35,750) (46,000) Total assets $ 515,760 $ 443,400 Liabilities and Equity Accounts payable $ 59,835 $ 112,000 Short-term notes payable 10,000 6,000 Long-term notes payable 70,000 49,000 Common stock, $5 par value 162,250 150,250 Paid-in capital in excess of par, common stock 36,000 0 Retained earnings 177,675 126,150 Total liabilities and equity $ 515,760 $ 443,400 KAZAAM COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 582,500 Cost of goods sold 289,000 Gross profit 293,500 Operating expenses Depreciation expense $ 20,000 Other expenses 133,600 153,600 Other gains (losses) Loss on sale of equipment 5,375 Income before taxes 134,525 Income taxes expense 25,500 Net income $ 109,025 Additional Information on Year 2011 Transactions a. The loss on the cash sale of equipment was $5,375 (details in b). b. Sold equipment costing $47,250, with accumulated depreciation of $30,250, for $11,625 cash. c. Purchased equipment costing $98,750 by paying $35,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $42,750 cash to reduce the long-term notes payable. f. Issued 2,400 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $57,500. Required: Prepare a complete statement of cash flows using a spreadsheet report its operating activities using the indirect method. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) a. Net income was $109,025. b. Accounts receivable increased. c. Merchandise inventory increased. d. Prepaid expenses decreased. e. Accounts payable decreased. f. Depreciation expense was $20,000. g. Sold equipment costing $47,250, with accumulated depreciation of $30,250, for $11,625 cash. This yielded a loss of $5,375. h. Purchased equipment costing $98,750 by paying $35,000 cash and (i.) by signing a long-term note payable for the balance. j. Borrowed $4,000 cash by signing a short-term note payable. k. Paid $42,750 cash to reduce the long-term notes payable. l. Issued 2,400 shares of common stock for $20 cash per share. m. Declared and paid cash dividends of $57,500. KAZAAM COMPANY Spreadsheet for Statement of Cash Flows For Year Ended December 31, 2011 December 31, 2010 Analysis of Changes December 31, 2011 Debit Credit Balance sheet%u2014debit bal. accounts Cash $ $ $ $ Accounts receivable Merchandise inventory Prepaid expenses Equipment $ $ Balance sheet%u2014credit bal. accounts Accum. depreciation%u2014Equip. $ $ Accounts payable Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings $ $ Statement of cash flows Operating activities Net income Increase in accts. receivable Increase in merch. inventory Decrease in prepaid expenses Decrease in accounts payable Depreciation expense Loss on sale of equipment Investing activities Receipt from sale of equipment Payment to purchase equipment Financing activities Borrowed on short-term note Payment on long-term note Issued common stock for cash Payments of cash dividends Noncash investing and financing activities Purchase of equip. financed by long-term note payable $ $