CHAPMAN COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31 2017 2016 $28,250 $20,000
ID: 2531427 • Letter: C
Question
CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31
2017
2016
$28,250
$20,000
75,000
58,000
220,000
250,000
9,000
7,000
332,250
335,000
600,000
502,000
150,000
125,000
450,000
377,000
$782,250
$712,000
$123,000
$115,000
47,250
72,000
27,000
25,000
197,250
212,000
70,000
100,000
267,250
312,000
370,000
280,000
145,000
120,000
515,000
400,000
$782,250
$712,000
CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2017
$1,255,250
722,000
533,250
252,100
75,000
25,000
8,150
360,250
173,000
43,000
$130,000
Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2017, using the direct method. (A reconciliation of net income to net cash provided is not required.) (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31
2017
2016
Current assets Cash$28,250
$20,000
Accounts receivable75,000
58,000
Inventory220,000
250,000
Prepaid expenses9,000
7,000
Total current assets332,250
335,000
Plant assets Plant assets600,000
502,000
Less: Accumulated depreciation—plant assets150,000
125,000
Net plant assets450,000
377,000
Total assets$782,250
$712,000
Current liabilities Accounts payable$123,000
$115,000
Salaries and wages payable47,250
72,000
Interest payable27,000
25,000
Total current liabilities197,250
212,000
Long-term debt Bonds payable70,000
100,000
Total liabilities267,250
312,000
Stockholders’ equity Common stock, $10 par370,000
280,000
Retained earnings145,000
120,000
Total stockholders’ equity515,000
400,000
Total liabilities and stockholders’ equity$782,250
$712,000
CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2017
$1,255,250
Cost of goods sold722,000
Gross profit533,250
Expenses Salaries and wages expense252,100
Interest expense75,000
Depreciation expense25,000
Other expenses8,150
Total expenses360,250
Operating income173,000
Income tax expense43,000
Net income$130,000
The following is additional information concerning Chapman’s transactions during the year ended May 31, 2017.
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 $98,000 were purchased by paying $28,000 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 2,000 shares of common stock at par value. 7. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.
Explanation / Answer
Cash flow direct method Sales 1255250 Adjustments to a cash basis Cash flow statement Accounts receivable as per 2016 58000 Cash flow from operating activities 151250 Accounts receivable as per 2017 -75000 1238250 Cash flow from Investing activities Less Cost of goods sold 722000 Adjustments to a cash basis Equipment purchased -28000 Inventory as per 2016 -250000 Inventory as per 2017 220000 -28000 Accounts payable as per 2016 115000 Cash flow from Financing activities Accounts payable as per 2017 -123000 684000 Issue of common stock 20000 Operating expense less depreciation 260250 Dividend paid -105000 Adjustments to a cash basis Bonds payable -30000 Prepaid expense 2016 -7000 Long term notes paid Prepaid expense 2017 9000 Long term note payable -115000 Accrued liabilities 2016 72000 Net Cash and cash equivalent 8250 Accrued liabilities 2017 -47250 287000 Add Beginning cash and cash equivalent 20000 Interest expense 75000 Ending cash and cash equivalent 28250 Adjustments to a cash basis Interest payable 2016 25000 Interest payable 2017 -27000 73000 Income tax expense 43000 Cash flow from operating activities 151250 Cash flow indirect method Cash flow from operating activities Cash flow from Financing activities Net income 130000 Adjustments to reconcile the net income Bonds payable -30000 Loss on sale of investment Common stock 20000 Depreciation expense 25000 Profit on sale of equipment Dividend paid -105000 Amortization of patents Changes in current asset and liabilities Increase in prepaid expense -2000 Cash flow from Financing activities -115000 Increase in accounts receivable -17000 decrease in Inventory 30000 Net Cash and cash equivalent 8250 decrease in accounts payable 8000 Add Beginning cash and cash equivalent 20000 Decrease in salaries and wages payable -24750 Ending cash and cash equivalent 28250 Increase in interest payable 2000 21250 Cash flow from operating activities 151250 Cash flow from Investing activities Equipment purchased -28000 Cash flow from Investing activities -28000