Below are the balance sheets and income statement for Chaps Company. Please prep
ID: 2465224 • Letter: B
Question
Below are the balance sheets and income statement for Chaps Company. Please prepare the statement of cash flow using both the direct and indirect methods.
Chaps Company
Balance Sheet
2014
2013
Cash
51,500
20,000
Accounts receivable
75,000
58,000
Allowance for doubtful accounts
(5,000)
(3,500)
Inventory
210,000
250,000
Prepaid expenses
14,000
7,000
Property, plant & equipment
600,000
502,000
Accumulated depreciation
(150,000)
(125,000)
Total Assets
$ 795,500
$ 708,500
Accounts payable
127,000
115,000
Salaries payable
47,000
72,000
Interest payable
34,000
25,000
Notes payable, long-term
70,000
100,000
Common stock
378,000
280,000
Retained earnings
139,500
116,500
Total liabilities and equity
$ 795,500
$ 708,500
Chaps Company
Income Statement
Sales revenue
$ 1,355,250
Cost of goods sold
772,000
Gross profit
583,250
Selling & administrative expenses
410,250
Pre-tax operating income
173,000
Realized gain on sale of equipment
25,000
Pre-tax income
198,000
Income taxes
43,000
Net income
$ 155,000
Additional information:
a. Sold factory equipment with a cost of $100,000 and accumulated depreciation of $75,000 for $50,000
b. The company purchased new equipment during 2014 and issued $98,000 in common stock for part of the purchase.
Chaps Company
Balance Sheet
2014
2013
Cash
51,500
20,000
Accounts receivable
75,000
58,000
Allowance for doubtful accounts
(5,000)
(3,500)
Inventory
210,000
250,000
Prepaid expenses
14,000
7,000
Property, plant & equipment
600,000
502,000
Accumulated depreciation
(150,000)
(125,000)
Total Assets
$ 795,500
$ 708,500
Accounts payable
127,000
115,000
Salaries payable
47,000
72,000
Interest payable
34,000
25,000
Notes payable, long-term
70,000
100,000
Common stock
378,000
280,000
Retained earnings
139,500
116,500
Total liabilities and equity
$ 795,500
$ 708,500
Chaps Company
Income Statement
Sales revenue
$ 1,355,250
Cost of goods sold
772,000
Gross profit
583,250
Selling & administrative expenses
410,250
Pre-tax operating income
173,000
Realized gain on sale of equipment
25,000
Pre-tax income
198,000
Income taxes
43,000
Net income
$ 155,000
Explanation / Answer
Statement of Cash Flows for 2014 - Indirect Method:
$ $ Cash flows from operating activities Net income 155,000 Adjustments for non-cash / non-operating items Depreciation expense 100,000 Allowance for doubtful accounts 1,500 Gain on sale of equipment (25,000) Interest expense 34,000 110,500 Operating profit before working capital changes 265,500 Increase in accounts receivable (17,000) Decrease in inventory 40,000 Increase in prepaid expenses (7,000) Increase in accounts payable 12,000 Decrease in salaries payable (25,000) 3,000 Net cash flows from operating activities 268,500 Cash flows from investing activities: Cash received from sale of equipment 50,000 Cash paid for purchase of equipment (198,000) Net cash used in investing activities (148,000) Cash flows from financing activities: Cash received from issue of common stock 98,000 Interest paid (25,000) Cash dividends paid (132,000) Notes payable retired ( 30,000) Net cash used in financing activities ( 89,000) Net increase in cash 31,500 Beginning cash 20,000 Ending cash 51,500Related Questions
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