Chapter 16, Problem 3BP

Gazelle Corporation’s current-year income statement, comparative balance sheets, and additional information follow. 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, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.

Additional Information on Current-Year Transactions

1. a. The loss on the cash sale of equipment was $2,1 00 (details in b).
2. b. Sold equipment costing $51,000, with accumulated depreciation of $22,850, for $26,050 cash.
3. c. Purchased equipment costing $113,250 by paying $43,250 cash and signing a long-term note payable for the balance.
4. d. Borrowed $5,000 cash by signing a short-term note payable.
5. e. Paid $47,500 cash to reduce the long-term notes payable.
6. f. Issued 3,000 shares of common stock for $15 cash per share.
7. g. Declared and paid cash dividends of $53,600

Required

1. 1. Prepare a complete statement of cash flows using the indirect method for the current year. Disclose any noncash investing and financing activities in a note.

  Analysis Component

1. 2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment.