Ernest Banks Company - 5,000 Income tax expense 9,000...

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Ernest Banks Company Comparative Balance Sheets December 31 Assets 2006 2005 Cash $23,000 $13,000 Accounts receivable 24,000 33,000 Merchandise inventory 20,000 27,000 Prepaid expenses 20,000 13,000 Land 40,000 40,000 Property, plant and equipment 200,000 225,000 Less: Accumulated depreciation (50,000) (67,500) ------------ ------------ Total $277,000 $283,500 Liabilities and Stockholders’ Equity Accounts payable $9,000 $18,500 Accrued expenses payable 9,500 7,500 Interest payable 1,000 1,500 Income taxes payable 3,000 2,000 Bonds payable 50,000 80,000 Common stock 123,000 105,000 Retained earnings 81,500 69,000 ________ ________ Total $277,000 $283,500 Ernest Banks Company Income Statement For the Year Ended December 31, 2006 Revenues Sales $600,000 Gain on sale of plant assets 2,500 $602,500 Less: Expenses ________ Cost of goods sold 500,000 Operating expenses (excluding Depreciation) 60,000 Depreciation expense 7,500 Interest expense
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Unformatted text preview: 5,000 Income tax expense 9,000 581,500 ______ _______ Net income $21,000 Additional information: 1. Plant assets were sold at a sales price of $62,500. 2. Additional equipment was purchased at a cost of $60,000. 3. Dividends of $8,500 were paid. 4. All sales and purchases were on account. 5. Bonds were redeemed at face value. 6. Additional shares of stock were issued for cash. Instructions Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the indirect method. P14-8A Data for Ernest Banks Company is presented in P14-7A. Further analysis reveals The following. 1. Accounts payable relates to merchandise creditors. 2. All operating expenses, except depreciation expense, were paid in cash. Instructions Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the direct method....
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