Chapman Company, a major retailer of bicycles and accessories, operates several

Question

Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2014, are as follows. The company is preparing its statement of cash flows. CHAPMAN COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31 2014 2013 Current assets Cash $28,980 $20,300 Accounts receivable 75,400 58,600 Inventory 220,660 250,980 Prepaid expenses 9,634 7,960 Total current assets 334,674 337,840 Plant assets Plant assets 600,770 502,280 Less: Accumulated depreciation—plant assets 150,980 125,900 Net plant assets 449,790 376,380 Total assets $784,464 $714,220 Current liabilities Accounts payable $123,360 $115,110 Salaries and wages payable 47,590 72,630 Interest payable 27,670 25,990 Total current liabilities 198,620 213,730 Long-term debt Bonds payable 70,980 100,370 Total liabilities 269,600 314,100 Stockholders’ equity Common stock, $10 par 370,960 280,750 Retained earnings 143,904 119,370 Total stockholders’ equity 514,864 400,120 Total liabilities and stockholders’ equity $784,464 $714,220 CHAPMAN COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2014 Sales revenue $1,255,350 Cost of goods sold 722,810 Gross profit 532,540 Expenses Salaries and wages expense 252,430 Interest expense 75,610 Depreciation expense 25,080 Other expenses 8,890 Total expenses 362,010 Operating income 170,530 Income tax expense 43,280 Net income $127,250 The following is additional information concerning Chapman’s transactions during the year ended May 31, 2014. 1. All sales during the year were made on account. 2. All merchandise was purchased on account, comprising the total accounts payable account. 3. Plant assets costing $98,490 were purchased by paying $28,490 in cash and issuing 7,000 shares of stock. 4. The “other expenses” are related to prepaid items. 5. All income taxes incurred during the year were paid during the year. 6. In order to supplement its cash, Chapman issued 2,021 shares of common stock at par value. 7. Cash dividends of $102,716 were declared and paid at the end of the fiscal year. Collapse question part (b) Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2014, using the direct method. (A reconciliation of net income to net cash provided is not required.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Explanation / Answer

Answer:(b) Statement of cash Flow:

Noncash investing and financing activities:

Issuance of common stock for plant assets $70,000

Chapman Company Statement of cash Flows For the year ended May 31,2014 Direct Method Cash Flow from operating activities: Cash Received from customers 1238550 Cash Payments: To Suppliers 684240 To employees 277470 For other expenses 10564 For interest 73930 For income taxes 43280 1089484 Net cash flow provided by operating activities 149066 Cash Flow from investing activities: Purchase of plant assets -28490 Cash Flow from Financing Activities: Cash Received from common stock issue 20210 Cash paid: For dividend -102716 To retire bonds Payable -29390 Net cash used by Financing activities -111896 Net increase in cash 8680 Opening cash 20300 Closing cash 28980 Collections from customers: Sales 1255350 Less: Increase in accounts receivable 16800 Cash collected from customers 1238550 Cash Paid to suppliers: Cost of merchandise sold 722810 Less: Dec in inventory 30320 Increase in accounts payable 8250 Cash Paid to suppliers 684240 Cash Paid to employees: Salary expense 252430 Add: Dec in salaries payable 25040 Cash Paid to employees 277470 Cash Paid for other expenses: Other expenses 8890 Add: Increase in prepaid expenses 1674 Cash Paid for other expenses 10564 Cash Paid for interest: Interest expense 75610 Less: Increase in interest payable 1680 Cash Paid for interest 73930 Cash paid for income taxes: Income tax expense (Given) 43280

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.