Galley Corp., a merchandiser, recently completed its 2011 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 Accounts Payable reflect cash payments for inventory, (5) Other Expenses 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.

GALLEY CORPORATION

Comparative Balance Sheets

December 31, 2011 and 2010

2011

2010

  Assets

  Cash

$

213,968   

$

136,584   

  Accounts receivable

101,308   

94,308   

  Merchandise inventory

706,584   

624,384   

  Equipment

434,964   

347,964   

  Accum. depreciation-Equipment

(175,340)  

(119,240)  

  Total assets

$

1,281,484   

$

1,084,000   

  Liabilities and Equity

  Accounts payable

$

135,944   

$

71,544   

  Income taxes payable

31,284   

28,184   

  Common stock, $2 par value

627,200   

597,200   

  Paid-in capital in excess of par value, common stock

242,200   

189,700   

  Retained earnings

244,856   

197,372   

  Total liabilities and equity

$

1,281,484   

$

1,084,000   

GALLEY CORPORATION

Income Statement

For Year Ended December 31, 2011

  Sales

$

1,866,600  

  Cost of goods sold

1,157,292  

  Gross profit

709,308  

  Operating expenses

       Depreciation expense

$

56,100  

       Other expenses

484,905  

541,005  

  Income before taxes

168,303  

  Income taxes expense

32,819  

  Net income

$

135,484  

Additional Information on Year 2011 Transactions

a.

Purchased equipment for $87,000 cash.

b.

Issued 15,000 shares of common stock for $5.50 cash per share.

c.

Declared and paid $88,000 in cash dividends.

Required:

Prepare a complete statement of cash flows using a spreadsheet; report operating activities under the indirect method. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.

Net income was $135,484.

b.

Accounts receivable increased.

c.

Merchandise inventory increased.

d.

Accounts payable decreased.

e.

Income taxes payable increased.

f.

Depreciation expense was $56,100.

g.

Purchased equipment for $87,000 cash.

h.

Issued 15,000 shares at $5.50 cash per share.

i.

Declared and paid $88,000 of cash dividends.

GALLEY CORPORATION

Spreadsheet for Statement of Cash Flows

For Year Ended December 31, 2011

December

31, 2010

Analysis of Changes

December

31, 2011

Debit

Credit

  Balance sheet-debit bal. accounts

     Cash

$  

$  

$  

$  

     Accounts receivable

     Merchandise inventory

     Equipment

$  

$  

  Balance sheet-credit bal. accounts

     Accum. depreciation-Equip

$  

$  

     Accounts payable

     Income taxes payable

     Common stock, $2 par value

     Paid-in excess of par value, common stock

     Retained earnings

$  

$  

  Statement of cash flows

  Operating activities

     Net income

     Increase in accounts  receivable

     Increase in merch. inventory

     Decrease in accounts payable

     Increase in income tax payable

     Depreciation expense

  Investing activities

     Payment for equipment

  Financing activities

     Issued common stock for cash

     Paid cash dividends

$  

$