Paris Company presented the following comparative balance sheets at December 31, 2010 and 2011, and the income statement for the year ended December 31, 2011:Paris CompanyBalance SheetsDecember 31, 2011 and 2010December 31, 2011 December 31, 2010Assets Cash $ 12,200 $ 28,200Accounts receivable 16,000 18,000Inventory 19,500 22,000Prepaid rent 200 300Total current assets $ 47,900 $ 68,500Land 54,000 30,000Equipment 75,000 60,000Accumulated depreciation (17,000) (4,000)Total assets $159,900 $154,500Liabilities and stockholdersâ equity Accounts payable $ 13,000 $ 25,000Salaries payable 2,000 2,500Interest payable 2,500 4,000Income tax payable 6,500 3,000Dividends payable 4,000 0Total current liabilities $ 28,000 $ 34,500Long-term notes payable 10,000 40,000Common stock, $1 par 30,000 28,000Preferred stock, $4 par 24,000 10,000Additional paid-in capital 45,000 30,000Retained earnings 22,900 12,000Total liabilities and stockholdersâ equity $159,900 $154,500Paris CompanyIncome StatementFor the Year Ended December 31, 2006Sales $ 400,000Cost of goods sold (250,000)Gross profit $ 150,000General and administrative expenses $80,000 Salaries expense 31,000 Rent expense 3,600 Depreciation expense 7,000 Total operating expenses (121,600)Other revenue and expenses: Gain on sale of land $ 3,000 Interest revenue 300 Interest expense (2,800) 500Income before income taxes $ 28,900Income tax expense (8,000)Net income $ 20,900Additional information:a. The company declared dividends in the amount of $10,000 during the year.b. Additional land and equipment were purchased for cash.c. Land that had originally cost $9,000 was sold for $12,000 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:Prepare the entries necessary to prepare the operating activities section of the statement of cash flows using the direct method.
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