Kazaam company a merchandiser recently completed its

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Reference no: EM13573427

Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year,all sales are credit sales, all credits to Accounts Receivable reflect cash receipts from customers,all purchases of inventory are on credit, all debits to Accounts Payable reflect cash payments for inventory, and 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 $ 49,200   
$ 73,500   
  Accounts receivable
65,890   

60,000   
  Merchandise inventory
277,500   

251,500   
  Prepaid expenses
1,500   

1,500   
  Equipment
159,000   

106,500   
  Accum. depreciation-Equipment
(42,125)

(52,000)






  Total assets $ 510,965   
$ 441,000   










  Liabilities and Equity




  Accounts payable $ 54,165   
$ 113,000   
  Short-term notes payable
9,000   

7,000   
  Long-term notes payable
67,500   

48,500   
  Common stock, $5 par value
162,750   

150,500   
  Paid-in capital in excess of par, common stock
36,750   

0   
  Retained earnings
180,800   

122,000   






  Total liabilities and equity $ 510,965   
$ 441,000   











KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
  Sales


$ 582,000
  Cost of goods sold



280,000






  Gross profit



302,000
  Operating expenses




       Depreciation expense $ 20,000


       Other expenses
133,600

153,600






  Other gains (losses)




       Loss on sale of equipment



5,750






  Income before taxes



142,650
  Income taxes expense



24,250






  Net income


$ 118,400









Additional Information on Year 2011 Transactions
a.

The loss on the cash sale of equipment was $5,750 (details in b).

b.

Sold equipment costing $47,250, with accumulated depreciation of $29,875, for $11,625 cash.

c.

Purchased equipment costing $99,750 by paying $25,000 cash and signing a long-term note payable for the balance.

d.

Borrowed $2,000 cash by signing a short-term note payable.

e.

Paid $55,750 cash to reduce the long-term notes payable.

f.

Issued 2,450 shares of common stock for $20 cash per share.

g. Declared and paid cash dividends of $59,600.

Reference no: EM13573427

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