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

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 Salaries payable 2,000 2,500 Interest payable 2,500 4,000 Income tax 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 tax expense (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 calendar year 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.