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PROBLEM SET C PROBLEM 16-1C Jumpin Jim Company, a merchandiser, recently completed its calendar-year 2008 operations. For the year, (1) all sales are credit sales, (2) all credits to accounts receivable reflect cash receipts from customers, (3) 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. Jumpin Jims balance sheet and income statement follow: JUMPIN JIM COMPANY Income Statement For Year Ended December 31, 2008 Sales $630,700 Cost of goods sold (278,000) Gross profit 352,700 Operating expenses Depreciation expense $ 15,620 Other expenses 189,000 (204,620) Other gains (losses) Gain on sale of equipment 10,200 Income before taxes $158,280 Income taxes (27,570) Net income $130,710 JUMPIN JIM COMPANY Comparative Balance Sheets December 31, 2008 2007 Assets Cash $ 54,400 $ 62,900 Accounts receivable 70,250 55,500 Merchandise inventory 210,800 204,800 Prepaid expenses 250 1,560 Equipment 102,580 88,000 Accum. depreciation Equip. (25,020) (24,200) Total assets $413,260 $388,560 Liabilities and Equity Accounts payable $ 41,090 $ 98,100 Short-term notes payable 5,000 -0- Long-term notes payable 26,000 40,000 Common stock, $2 par value 122,000 120,000 Contributed capital in excess of par, common stock 70,500 67,500 Retained earnings 148,670 62,960 Total liabilities and equity $413,260 $388,560 Additional Information on Year 2008 Transactions a. The gain on cash sale of equipment is $10,200 (details in b ).... View Full Document

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