Question

P23.7 (LO 2, 3, 4) Groupwork (SCF-Direct and Indirect Methods from Comparative Financial Statements) Chapman Company, 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, 2020, are as follows. The company is preparing its statement of cash flows. 2019 $ 20,000 58,000 250,000 7,000 _335,000 502,000 Chapman Company Comparative Balance Sheet As of May 31 2020 Current assets Cash $ 28,250 Accounts receivable 75,000 Inventory 220,000 Prepaid expenses 9,000 Total current assets 332,250 Plant assets Plant assets 600,000 Less: Accumulated depreciation-plant assets 150,000 Net plant assets 450,000 Total assets $782,250 Current liabilities Accounts payable $123,000 Salaries and wages payable 47,250 Interest payable 27,000 Total current liabilities 197,250 Long-term debt Bonds payable 70,000 Total liabilities 267,250 125,000 377,000 $712,000 $115,000 72,000 25,000 212,000 100,000 312,000

Prepare a statement of Cash Flows using the Indirect Method.

Answer 1

Statement of Cash Flow Statement (Indirect Method) :-

Cash flow from Operating Activities:
Net income		$130000
Adjustment to reconcile net income to cash basis:
Depreciation expense	$25000
Increase Account receivable	($17000)
Decrease Inventory	$30000
Increase Prepaid Expense	($2000)
Increase Account payable	$8000
Decrease Salaries & Wages Payable	($24750)
Increase Interest payable	$2000
		$21250
Cash flow from Operating Activities		$151250
Cash flow from Investing Activities:
Cash paid for purchase of plant asset	($28000)
Cash flow from Investing Activities		($28000)
Cash flow from Financing Activities
Issue common stock (2000 * $10)	$20000
Repaid Bonds	($30000)
Cash dividend paid	($105000)
Cash flow from Financing Activities		($115000)
Net cash Increase/(decrease)		$8250
Add: Beginning Cash Balance		$20000
Ending Cash Balance		$28250