1.
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
$
49,800
$
74,000
Accounts receivable
65,810
51,000
Merchandise inventory

2.
278,000
251,500
Prepaid expenses
1,000
1,900
Equipment
158,000
106,000
Accum. depreciation—Equipment
(41,750)
(52,000)
Total assets
$
510,860
$
432,400
Liabilities and Equity

3.
Accounts payable
$
69,735
$
115,000
Short-term notes payable
12,000
7,000
Long-term notes payable
60,000
48,750
Common stock, $5 par value
162,000
150,250
Paid-in capital in excess of par, common stock
35,250
0
Retained earnings
171,875

4.
111,400
Total liabilities and equity
$
510,860
$
432,400
KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
Sales
$
583,500
Cost of goods sold
286,000
Gross profit

5.
297,500
Operating expenses
Depreciation expense
$
20,000
Other expenses
132,400
152,400
Other gains (losses)
Loss on sale of equipment

6.
5,125
Income before taxes
139,975
Income taxes expense
23,000
Net income
$
116,975
Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,125 (details in
b

7.
).
b.
Sold equipment costing $46,875, with accumulated depreciation
of $30,250, for $11,500 cash.
c.
Purchased equipment costing $98,875 by paying $25,000 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 $62,625 cash to reduce the long-term notes payable.
f.
Issued 2,350 shares of common stock for $20 cash per share.
g.
Declared and paid cash dividends of $56,500.
Required:
Prepare a complete statement of cash flows using a spreadsheet
report its operating activities using the indirect method.
(Leave no cells blank - be certain to enter "0" wherever
required. Omit the "$" sign in your response.)
a.
Net income was $116,975.
b.
Accounts receivable increased.
c.
Merchandise inventory increased.
d.
Prepaid expenses decreased.
e.
Accounts payable decreased.
f.
Depreciation expense was $20,000.
g.
Sold equipment costing $46,875, with accumulated depreciation

8.
of $30,250, for $11,500 cash. This yielded a loss of $5,125.
h.
Purchased equipment costing $98,875 by paying $25,000 cash
and
(i.)
by signing a long-term note payable for the balance.
j.
Borrowed $5,000 cash by signing a short-term note payable.
k.
Paid $62,625 cash to reduce the long-term notes payable.
l.
Issued 2,350 shares of common stock for $20 cash per share.
m.
Declared and paid cash dividends of $56,500.
KAZAAM COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2011
December
31, 2010
Analysis of Changes
December
31, 2011
Debit
Credit
Balance sheet—debit bal. accounts
Cash
$ [removed]
$ [removed]

9.
$ [removed]
$ [removed]
Accounts receivable
[removed]
[removed]
[removed]
[removed]
Merchandise inventory
[removed]
[removed]
[removed]
[removed]
Prepaid expenses
[removed]
[removed]
[removed]
[removed]
Equipment
[removed]
[removed]
[removed]
[removed]
$ [removed]
$ [removed]
Balance sheet—credit bal. accounts

10.
Accum. depreciation—Equip.
$ [removed]
[removed]
[removed]
$ [removed]
Accounts payable
[removed]
[removed]
[removed]
[removed]
Short-term notes payable
[removed]
[removed]
[removed]
[removed]
Long-term notes payable
[removed]
[removed]
[removed]
[removed]
Common stock, $5 par value
[removed]
[removed]
[removed]
[removed]
Paid-in capital in excess of
par value, common stock
[removed]
[removed]
[removed]
[removed]
Retained earnings
[removed]
[removed]

11.
[removed]
[removed]
$ [removed]
$ [removed]
Statement of cash flows
Operating activities
Net income
[removed]
[removed]
Increase in accts. receivable
[removed]
[removed]
Increase in merch. inventory
[removed]

12.
[removed]
Decrease in prepaid expenses
[removed]
[removed]
Decrease in accounts payable
[removed]
[removed]
Depreciation expense
[removed]
[removed]
Loss on sale of equipment
[removed]
[removed]
Investing activities
Receipt from sale of equipment
[removed]
[removed]
Payment to purchase equipment
[removed]
[removed]

13.
Financing activities
Borrowed on short-term note
[removed]
[removed]
Payment on long-term note
[removed]
[removed]
Issued common stock for cash
[removed]
[removed]
Payments of cash dividends
[removed]
[removed]
Noncash investing and financing activities
Purchase of equip. financed
by long-term note payable
[removed]
[removed]

14.
$ [removed]
$ [removed]