Galley Corp., a merchandiser, recently completed its 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 if inventory are on credit, (4) all debits to Accounts payable reflect cash payments for inventory, (5) Other expenses are all cash expenses and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statements follow.
GALLEY CORPORATION
Comparative Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $174,000 $117,000
Accounts receivable 93,000 81,000
Merchandise inventory 609,000 534,000
Equipment 333,000 297,000
Accum. depreciation equip (156,000) (102,000)
Total assets $1,053,000 927,000
Liabilities and Equity
Accounts payable $69,000 $96,000
Income taxes payable 27,000 24,000
Common stock, $2 par value 582,000 558,000
Paid in capital in excess of par value, common stock 198,000 162,000
Retained earnings 177,000 87,000
Total liabilities and equity $1,053,000 $927,000
GALLEY CORPORATION
Income Statement
For year Ended December 31, 2011
Sales $1,992,000
Cost of goods sold 1,194,000
Gross Profit 798,000
Operating Expenses
Depreciation Expense $54,000
Other Expenses 501,000 555,000
Income before taxes 243,000
Income tax expense 42,000
Net income $201,000
Additional Information on Year 2011 Transactions
a. purchased equipment for $36,000 cash
b. Issued 12,000 shares of common stock for $5 cash per share
c. Declared and paid $111,000 in cash dividends
Required
Prepare and complete statement of cash inflows and cash outflows from operating activities according to the indirect method.