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
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2014

$1,255,700

722,190

533,510

252,620

75,100

25,390

8,660

361,770

171,740

43,520

$128,220

CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31

2014

2013

$28,450

$20,130

75,490

58,790

220,300

250,700

9,353

7,220

333,593

336,840

600,170

502,580

150,700

125,310

449,470

377,270

$783,063

$714,110

$123,020

$115,820

47,890

72,140

27,070

25,430

197,980

213,390

70,040

100,180

268,020

313,570

370,660

280,890

144,383

119,650

515,043

400,540

$783,063

$714,110

Cash dividends of $103,487 were declared and paid at the end of the fiscal year.

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.)

b.Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2014.

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.)

CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2014

Sales revenue

$1,255,700

Cost of goods sold

722,190

   Gross profit

533,510

Expenses    Salaries and wages expense

252,620

   Interest expense

75,100

   Depreciation expense

25,390

   Other expenses

8,660

     Total expenses

361,770

Operating income

171,740

   Income tax expense

43,520

Net income

$128,220

Explanation / Answer

Chapman Co.

Cash Flow Statement for the year ended May 31 2014

Direct Method

b. Cash Flows from Operating Activities - Indirect Method

$ $ Cash flows from operating activities Collection of accounts receivable 1,239,000 Payment for goods and services (972,253) Cash flows before taxes 266,747 Less tax paid 43,520 Net cash flows from operating activities 223,227 Cash flows from investing activities Purchase of plant (22,390) Net cash used in investing activities (22,390) Cash flows from financing activities Issue of common stock 14,570 Retirement of bonds payable (30,140) Dividends paid (103,487) Interest paid (73,460) Net cash used in financing activities (192517) Increase in cash and cash equivalents 8,320

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