Kazaam Company, a merchandiser, recently completed its calendar-year

Kazaam Company, a merchandiser, recently completed its calendar-year 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, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.



KAZAAM COMPANY
Comparative Balance Sheets
December 31, 2011 and 2010




2011





2010

Assets
















Cash


$


49,600





$


73,500

Accounts receivable





65,870








60,000

Merchandise inventory





278,000








251,000

Prepaid expenses





1,000








1,600

Equipment





158,000








107,500

Accum. depreciation—Equipment





(35,500)








(46,000)










Total assets


$


516,970





$


447,600










Liabilities and Equity
















Accounts payable


$


64,945





$


114,000

Short-term notes payable





10,000








7,000

Long-term notes payable





60,000








48,500

Common stock, $5 par value





162,750








150,500

Paid-in capital in excess of par, common stock





36,750








0

Retained earnings





182,525








127,600










Total liabilities and equity


$


516,970





$


447,600












KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011

Sales











$


583,500

Cost of goods sold














289,000














Gross profit














294,500

Operating expenses
















Depreciation expense


$


20,000










Other expenses





134,000








154,000














Other gains (losses)
















Loss on sale of equipment














5,125














Income before taxes














135,375

Income taxes expense














24,250














Net income











$


111,125
















Additional Information on Year 2011 Transactions

a.


The loss on the cash sale of equipment was $5,125 (details in b).

b.


Sold equipment costing $47,250, with accumulated depreciation of $30,500, for $11,625 cash.

c.


Purchased equipment costing $97,750 by paying $30,000 cash and signing a long-term note payable for the balance.

d.


Borrowed $3,000 cash by signing a short-term note payable.

e.


Paid $56,250 cash to reduce the long-term notes payable.

f.


Issued 2,450 shares of common stock for $18 cash per share.

g.


Declared and paid cash dividends of $56,200.



Required:

1.


Prepare a complete statement of cash flows; report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)