Reference no: EM131777028

Problem - Memphis Corp., a merchandiser, recently completed its 2009 operations. For the year (1)all sales are credit sales, (2) all credits to Accounts receivable reflect cash receipts from customers, (3)all purchases of inventory are on credit, (4)all debits to Account Payable reflect cash payments for inventory, (5)Other Expense are all cash expenses and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company's balance sheets and income statement follow.

MEMPHIS COORPOATION Comparative Balance Sheets December 31, 2009 and 2008

Assets 2009 2008

Cash.... $165,000 $137,000

Accounts receivable.... 82,000 74,000

Merchandise inventory..... 620,000 525,000

Equipment........... 345,000 240,000

Accum. Depreciation-equipment. (159,000) (102,000)

Total assets............. $1,053.000 $874,000

Liabilities and Equity

Accounts payable.......... $160,000 $ 96,000

Income taxes payable..... 22,000 19,000

Common stock,$2 par value... 588,000 560,000

Paid-in capital in excess of

par value,common stock....... 201,000 159,000

Retained earnings.......... 82,000 40,000

Total liabilities $1,053,000 $874,000

MEMPHIS CORPORATION Income Statement For Year Ended December 31, 2009

Sales......... $1,794,000

Cost of goods sold........ 1,088,000

Gross profit......... 706,000

Operating expenses

Depreciation expense..... $ 57,000

Other expenses.......... 500,000 557,000

Income before taxes...... 149,000

Income taxes expense...... 22,000

Net income....... $127,000

Additional information on year 2009 Transactions

a. Purchased equipment for $105,000 cash.

b. Issued 14,000 shares of common stock for $5 cash per share.

c. Declared and paid $85,000 in cash dividends.

Required - Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to indirect method.