College Accounting: Chapter 23 Mastery Problem - Financial statements for Peachfield Corporation

College Accounting Chapter 23 Mastery Problem Financial statements for Peachfield Corporation as well as additional information relevant to cash flows during the period follow. Peachfield Corporation Income Statement For the Year Ended December 31, 20-2 Net sales 985,000 Cost of goods sold 515,000 Gross profit 470,000 Operating expenses 299,400 Operating income 170,600 Other revenues and expenses: Gain on sale of office equipment 5,000 Interest revenue 2,100 Interest expense (436) 6,664 income before taxes 177,264 Income tax expense 60,500 Net Income $116,764 Peachfield Corporation Statement of Retained Earnings For the Year Ended December 31, 20-2 Retained earnings, January 1, 20-2 141,973 Net income 116,764 Less dividends 20,000 Net increase in retained earnings 96,764 Retained earnings, December 31, 20-2 $238,737 Additional information: 1. Office equipment was sold during the year for $75,000. Cost 80,000 Accumulated depreciation (10,000) Book value 70,000 Market value 75,000 Gain 5,000 2. Depreciation expense for the year was $62,400 as follows: Store equipment 24,000 Delivery equipment 27,000 Office equipment 11,400 62,400 3. No other equipment was sold during the year. The following purchases were made for cash. Store equipment 55,200 Delivery equipment 78,000 Office equipment 24,060 157,260 4. Declared and paid cash dividends of $20,000. 5. Issued 11,200 shares of $10 par common stock for $118,000. 6. Issued a note payable for $10,700. 7. Additional store equipment was acquired by issuing a long-term note payable for $20,000. REQUIRED 1. Prepare a statement of cash flows explaining the change in cash and cash equivalents. 2. Reconcile cash and cash equivalents at the bottom of the statement of cash flows.
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