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P1. PXE Company presented the following comparative balance sheets at December 31 2005 and 2006 and the income statement for the year ended December 31 2006:PXE CompanyBalance SheetsDecember 31 2006 and 2005December 31 2006 December 31 2005Assets Cash $ 12200 $ 28200Accounts receivable 16000 18000Inventory 19500 22000Prepaid rent 200 300Total current assets $ 47900 $ 68500Land 58000 30000Equipment 65000 60000Accumulated depreciation (11000) (4000)Total assets $159900 $154500Liabilities and stockholders equity Accounts payable $ 13000 $ 25000Salaries payable 2000 2500Interest payable 2500 4000Income tax payable 6500 3000Dividends payable 4000 0Total current liabilities $ 28000 $ 34500Long-term notes payable 10000 40000Common stock $1 par 30000 28000Preferred stock $4 par 24000 10000Additional paid-in capital 45000 30000Retained earnings 22900 12000Total liabilities and stockholders equity $159900 $154500PXE CompanyIncome StatementFor the Year Ended December 31 2006Sales $ 400000Cost of goods sold (250000)Gross profit $ 150000General and administrative expenses $80000 Salaries expense 31000 Rent expense 3600 Depreciation expense 7000 Total operating expenses (121600)Other revenue and expenses: Gain on sale of land $ 3000 Interest revenue 300 Interest expense (2800) 500Income before income taxes $ 28900Income tax expense (8000)Net income $ 20900Additional information:a. The company declared dividends in the amount of $10000 during the year.b. Additional land and equipment were purchased for cash.c. Land that had originally cost $9000 was sold for $12000 cash.d. All accounts payable are related to merchandise purchases.e. The company uses a perpetual LIFO inventory system and uses straight-line depreciation for all depreciable assets.Required:1. Prepare the operating activities section of the statement of cash flows using the indirect method.P2. Salary expense on the books was $43000. Salary payable at the beginning of the year was $11000 and at the end of the year was $12500. How much cash was paid out for salaries?P3. Rent expense on the books was $15000. Prepaid rent at the beginning of the year was $3000 and at the end of the year was $1250. How much cash was paid out for rent?P4. Sales revenue on the books was $118000. Accounts receivable at the end of the year was $14000 and accounts receivable at the beginning of the year was $16000. How much cash was received for sales?P5. Sales revenue on the books was $175000. Unearned revenue at the end of the year was $12000 and unearned revenue at the beginning of the year was $4500. How much cash was received from revenue?P6. Harp s Business Machines Inc. reported the following items from its comparative balance sheet for the calendar year 2008:2008 2007Inventory $125000 $100000Land 100000 200000Building 570000 500000Equipment 45000 30000Accumulated depreciation (105000) (50000)Notes payable 100000 150000Common stock 300000 200000Additional information for 2008:1. A piece of land was sold for $65000 resulting in a $5000 gain.2. A smaller section of land was sold for $26000 resulting in a $14000 loss.3. A building was started and completed costing $70000. All costs were paid in cash.4. Depreciation expense totaled $55000 for the year.Required:Determine the cash flows from investing activities for Harp s Business Machines Inc. for 2008.P7. Checker s Games Co. reported the following items on its comparative balance sheet for 2008:2008 2007Accounts payable $200000 $175000Dividends payable 10000 0Notes payable 280000 240000Common stock 315000 290000Additional paid-in capital 120000 100000Land 175000 150000Goodwill 45000 75000Additional information for 2008:1. A $70000 note payable was issued for cash.2. Interest expense totaled $15000 for the year of which $13500 was paid in cash.3. Stock was issued for cash (the transaction involved common stock).4. A note payable for $30000 was repaid.5. Dividends of $50000 were declared of which $40000 have been paid.Required: Prepare the financing section of the cash flow statement in good form for Checker s Games Co.P8. On January 1 2006 ABC Company bought equipment for $12000 with an estimated useful life of 5 years and no salvage value. ABC uses straight-line depreciation. On January 1 2008 it was decided that the sum-of-the-years-digits was more appropriate.What journal entry do you make on January 1 2008?

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