PXE Company presented the following comparative balance

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 PXE Company presented the following comparative balance

P1. PXE Company presented the following comparative balance sheets at December 31, 2005 and 2006, and the income statement for the year ended December 31, 2006:
PXE Company
Balance Sheets
December 31, 2006 and 2005

December 31, 2006 December 31, 2005
Assets
Cash $ 12,200 $ 28,200
Accounts receivable 16,000 18,000
Inventory 19,500 22,000
Prepaid rent 200 300
Total current assets $ 47,900 $ 68,500
Land 58,000 30,000
Equipment 65,000 60,000
Accumulated depreciation (11,000) (4,000)
Total assets $159,900 $154,500

Liabilities and stockholders’ equity
Accounts payable $ 13,000 $ 25,000
.justanswer.com/multiple-problems/85tbb-p1-pxe-company-presented-following-comparative-balance.html#”>Salaries payable 2,000 2,500
Interest payable 2,500 4,000
.justanswer.com/multiple-problems/85tbb-p1-pxe-company-presented-following-comparative-balance.html#”>Incometax payable 6,500 3,000
Dividends payable 4,000 0
Total current liabilities $ 28,000 $ 34,500
Long-term notes payable 10,000 40,000
Common stock, $1 par 30,000 28,000
Preferred stock, $4 par 24,000 10,000
Additional paid-in capital 45,000 30,000
Retained earnings 22,900 12,000
Total liabilities and stockholders’ equity $159,900 $154,500

PXE Company
Income Statement
For the Year Ended December 31, 2006

Sales $ 400,000
Cost of goods sold (250,000)
Gross profit $ 150,000
General and administrative expenses $80,000
Salaries expense 31,000
Rent expense 3,600
Depreciation expense 7,000
Total operating expenses (121,600)
Other revenue and expenses:
Gain on sale of land $ 3,000
Interest revenue 300
Interest expense (2,800) 500
Income before income taxes $ 28,900
Income .justanswer.com/multiple-problems/85tbb-p1-pxe-company-presented-following-comparative-balance.html#”>taxexpense (8,000)
Net income $ 20,900

Additional information:
a. The company declared dividends in the amount of $10,000 during the year.
b. Additional land and equipment were purchased for cash.
c. Land that had originally cost $9,000 was sold for $12,000 cash.
d. All accounts payable are related to merchandise purchases.
e. The company uses a perpetual LIFO inventory system and uses straight-line depreciation for all depreciable assets.

Required:
1. Prepare the operating activities section of the statement of cash flows using the indirect method.

P2. Salary expense on the books was $43000. Salary payable at the beginning of the year was $11000 and at the end of the year was $12500. How much cash was paid out for salaries?

P3. Rent expense on the books was $15000. Prepaid rent at the beginning of the year was $3000 and at the end of the year was $1250. How much cash was paid out for rent?

P4. Sales revenue on the books was $118000. Accounts receivable at the end of the year was $14000 and accounts receivable at the beginning of the year was $16000. How much cash was received for sales?

P5. Sales revenue on the books was $175000. Unearned revenue at the end of the year was $12000 and unearned revenue at the beginning of the year was $4500. How much cash was received from revenue?

P6. Harp’s Business Machines Inc. reported the following items from its comparative balance sheet for the .justanswer.com/multiple-problems/85tbb-p1-pxe-company-presented-following-comparative-balance.html#”>calendaryear 2008:

2008 2007
Inventory $125,000 $100,000
Land 100,000 200,000
Building 570,000 500,000
Equipment 45,000 30,000
Accumulated depreciation (105,000) (50,000)
Notes payable 100,000 150,000
Common stock 300,000 200,000

Additional information for 2008:
1. A piece of land was sold for $65,000, resulting in a $5,000 gain.
2. A smaller section of land was sold for $26,000, resulting in a $14,000 loss.
3. A building was started and completed costing $70,000. All costs were paid in cash.
4. Depreciation expense totaled $55,000 for the year.

Required:
Determine the cash flows from investing activities for Harp’s Business Machines Inc. for 2008.

P7. Checker’s Games Co. reported the following items on its comparative balance sheet for 2008:

2008 2007
Accounts payable $200,000 $175,000
Dividends payable 10,000 0
Notes payable 280,000 240,000
Common stock 315,000 290,000
Additional paid-in capital 120,000 100,000
Land 175,000 150,000
Goodwill 45,000 75,000

Additional information for 2008:
1. A $70,000 note payable was issued for cash.
2. Interest expense totaled $15,000 for the year of which $13,500 was paid in cash.
3. Stock was issued for cash (the transaction involved common stock).
4. A note payable for $30,000 was repaid.
5. Dividends of $50,000 were declared of which $40,000 have been paid.

Required: Prepare the financing section of the cash flow statement in good form for Checker’s Games Co.

P8. On January 1, 2006, ABC Company bought equipment for $12,000 with an estimated useful life of 5 years and no salvage value. ABC uses straight-line depreciation. On January 1, 2008, it was decided that the sum-of-the-years-digits was more appropriate.

What journal entry do you make on January 1, 2008?

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