Group B Melba Moncayo and Jonathan Montoya formed a partnership. They have provided the following financial statements and additional information for you to:
(1) prepare a complete statement of cash flows for the year ended December 31, 2015. The cash provided or used by operating activities should be reported using the direct method.
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Moncayo and Montoya Company
Balance Sheets
At December 31
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2015
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2014
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Assets:
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Cash
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$85,600
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$65,200
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Accounts receivable, net
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72,850
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56,750
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Merchandise inventory
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157,750
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144,850
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Prepaid expenses
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6,080
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12,680
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Equipment
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280,600
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245,600
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Accumulated depreciation-Equipment
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(80,600)
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(97,600)
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Total assets
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$522,280
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$427,480
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Liabilities:
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Accounts payable
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$52,850
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$45,450
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Income taxes payable
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15,240
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12,240
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Notes payable (long term)
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59,200
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79,200
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Total liabilities
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$127,290
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$136,890
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Equity:
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Common stock
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200,000
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150,000
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Paid-in capital in excess of par
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53,000
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40,000
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Retained earnings
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141,990
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100,590
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Total equity
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$394,990
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$290,590
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Total liabilities and equity
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$522,280
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$427,480
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Moncayo and Montoya Company
Income Statement
For Year Ended December 31, 2015
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Sales
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$488,000
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Cost of goods sold
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$212,540
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Depreciation expense
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43,000
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Other operating expenses
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106,260
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Interest expense
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6,400
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(368,200)
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Other gains (losses):
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Gain on sale of equipment
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4,700
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Income before taxes
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124,500
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Income taxes expense
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41,100
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Net income
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$83,400
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Additional Information
a. A $20,000 note payable is retired at its carrying value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $120,000 cash.
d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.
e. Prepaid expenses relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.