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Report Cash Flows From Operating Activites - Indirect Method

See attached file for proper format.

16-4A - Gallery Corp., a merchandiser, recently compiled 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 of 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 statement 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 - Equipment.................................. (156,000) (102,000)
Total assets........................................................... $1,053,000 $927,000

Liabilities
Accounts payable.....................................................$69,000 $96,000
Income tax 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 taxes 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 a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method.

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Solution Summary

The solution discusses report cash flows from operating activities using the indirect method.

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