Company X Debits Cash and Cash Equivalents Accounts Receivable Inventory Prepaid Insurance Lomg-Term Investments (at cost)

Equipment Treasury Stock (at cost) Cost of Goods Sold Operating Expenses Income Tax Expense Loss on Sale of Equipment Total Debits Credits Accumulated Depreciation -Equipment Accounts Payable Interest Payable Income Tax Payable Notes Payable- Long Term Common stock Paid-in Capital in Excess of Par Retained Earnings Sales gain on Sale of Long-Term Investments Total Credits

31-Dec-05 1-Jan-05 176,400 $ 58,000 32,000 26,600 21,000 25,400 5,600 4,000 6,000 16,800 80,000 66,000 10,000 20,000 368,000 185,000 37,600 1,000 $ 922,600 $ 216,800 $ 31-Dec-05 1-Jan-05 19,000 $ 18,000 7,000 11,200 1,000 2,000 12,000 8,000 16,000 24,000 110,000 100,000 32,000 30,000 19,600 23,600 704,000 2,000 $ 922,600 $ 216,800 $

Additional information a) all purchases and sales were on account b) equipment costing $10,000 was sold for $3,000; a loss of $1,000 was recognized on the sale c) the operating expenses included depreciation expense of $7,000; interest expense of $2,800; and insurance expense of $2,4 equipment was purchased during the year by issuing common stock and by paying balance ($12,000) in cash treasury stock was sold for $4,000 less than it cost; the decrease in owner's equity was recorded by reducing Retained Earning No dividends were paid during the year. 1. Prepare a statement of cash flow for the year ended December 31, 2005, using direct method of reporting cash flows from operating activities 2. Prepare separate statement of cash flow using indirect method for the year ended December 31, 2005. 3. Prepare an income statement, for the year ended December 31, 2005.

insurance expense of $2,400

educing Retained Earnings.