PICTURE PERFECT COMPARATIVE BALANCE SHEETS DECEMBER 31, Increase ASSETS 2011 2010 (Decrease) Additional Information: Cash $140,000 $30,000 $110,000 * Accounts receivable 79,000 90,000 $(11,000) O Inventory 90,000 110,000 $(20,000) O Prepaid Insurance 16,000 14,000 $2,000 O Land 130,000 210,000 $(80,000) I Land costing $100,000 sold for $90,000 Building 510,000 410,000 $100,000 I Building purchased for cash Accumulated Depreciation (105,000) (100,000) $(5,000) O Total Assets $860,000 $764,000 $96,000 Liabilities & Owners' Equity Accounts payable $30,000 $35,000 $(5,000) O Income tax payable 32,600 30,000 2,600 O Notes payable, long-term 50,000 60,000 (10,000) F Payment of $10,000 made Bonds payable 130,000 110,000 20,000 F Bonds issued@par in exchange for land Common stock 460,000 410,000 50,000 F $50,000 Par value stock issued @ $60,000 Paid-in capital 70,000 60,000 10,000 F $50,000 Par value stock issued @ $60,000 Retained earnings 87,400 59,000 28,400 F & O Dividends of $15,000 declared & paid Total Liabilities& Owners' Equity $860,000 $764,000 $96,000 PICTURE PERFECT INCOME STATEMENT For the Year Ended December 31, 2011 Sales Revenue $250,000 Expenses: Cost of goods sold $90,000 Salary expense 49,000 Depreciation expense 5,000 * Interest expense 13,000 Insurance expense 11,000 Loss on sale of land 10,000 * Income tax expense 28,600 Total expenses $206,600 Net Income $43,400 * PICTURE PERFECT STATEMENT OF CASH FLOWS For the Year Ended December 31, 2011 Cash flows from operating activities: Net income $43,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 5,000 Loss on sale of land 10,000 Decrease in accounts receivable 11,000 Decrease in inventory 20,000 Increase in prepaid expenses (2,000) Decrease in accounts payable (5,000) Increase in income taxes payable 2,600 41,600 Net cash provided by operating activities 85,000 Cash flows from investing activities: Proceeds from the sale of land (10,000) Purchase of building 100,000 Net cash used by investing activities 90,000 Cash flows from financing activities: Payment on long-term notes payable (10,000) Proceeds from issuance of stock Payment of dividends Net cash provided by financing activities (10,000) Net increase in cash Cash balance, 2010 Cash balance, 2011 Noncash investing and financing activities: Purchased land in exchange for bonds issued at par value.