Problem 16-3B

Indirect:Statement of cash flows

A1P1P2P3

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 companys 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	15,100	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 inb).
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. g.	Issued 3,000 shares of common stock for $15 cash per share. Declared and paid cash dividends of $53,600.
g.	Declared and paid cash dividends of $53,600.

Required

1.Prepare a complete statement of cash flows; report its operating activities using theindirect method. Disclose any noncash investing and financing activities in a note.

CheckCash from operating activities, $130,200

Analysis Component

2.Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment.