Preparing a Complex Statement of Cash Flows (Indirect Method)
Rocky Mountain Chocolate Factory manufactures an extensive line of premium chocolate candies for sale at its franchised and company-owned stores in malls throughout the United States. Its balance sheet for the first quarter of a recent year is presented along with an analysis of selected accounts and transactions:
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. Balance Sheets | ||
Assets | May 31 (Unaudited) | February 29 |
Current assets |
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|
Cash and cash equivalents | $ 921,505 | $ 528,787 |
Accounts and notes receivable−trade, less allowance for doubtful accounts of $43,196 at May 31 and $28, 196 at February 29 | 1,602,582 | 1,463,901 |
Inventories | 2,748,788 | 2,504,908 |
Deferred tax asset | 59,219 | 59,219 |
Other | 581,508 | 224,001 |
Total current assets | 5,913,602 | 4,780,816 |
Property and equipment—at cost | 14,010,796 | 12,929,675 |
Less accumulated depreciation and amortization | −2,744,388 | −2,468,084 |
| 11,266,408 | 10,461,591 |
Other assets |
|
|
Notes and accounts receivable due after one year | 100,206 | 111,588 |
Goodwill and other intangibles, net of accumulated amortization of $259,641 at May 31 and $253,740 at Feb. 29 | 330,359 | 336,260 |
Other | 574,130 | 624,185 |
| 1.004,695 | 1.072,033 |
| $18,184,705 | $16,314,440 |
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|
|
| May 31 (Unaudited) | February 29 |
Liabilities and Equity |
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|
Current liabilities |
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|
Short-term debt | $ 0 | $ 1,000,000 |
Current maturities of long-term debt | 429,562 | 134,538 |
Accounts payable—trade | 1,279,455 | 998,520 |
Accrued liabilities | 714,473 | 550,386 |
Income taxes payable | 11,198 | 54,229 |
Total current liabilities | 2,434,688 | 2,737,673 |
Long-term debt, less current maturities | 4,193,290 | 2,183,877 |
Deferred income taxes | 275,508 | 275,508 |
Stockholders’ Equity |
|
|
Common stock—authorized 7,250,000 shares, $.03 par value; issued 3,034,302 shares at May 31 and at Feb. 29 | 91,029 | 91,029 |
Additional paid-in capital | 9,703,985 | 9,703,985 |
Retained earnings | 2,502,104 | 2,338,267 |
| 12,297,118 | 12,133,281 |
Less common stock held in treasury, at cost— 129,153 shares at May 31 and at February 29 | 1.015,899 | 1,015,899 |
| 11.281,219 | 11,117,382 |
| $18,184,705 | $16,314,440 |
Analysis of Selected Accounts and Transactions:
a. Net income was $163,837. Notes and accounts receivable due after one year relate to operations.
b. Depreciation and amortization totaled $282,205.
c. No “other” noncurrent assets (which relate to investing activities) were purchased this period.
d. No property, plant, and equipment were sold during the period. No goodwill was acquired or sold.
e. Proceeds from issuance of long-term debt were $4,659,466 and principal payments were $2,355,029. (Combine the current maturities with the long-term debt in your analysis.)
f. No dividends were declared or paid.
g. Ignore the “deferred tax asset” and “deferred income taxes” accounts.
Required:
Prepare a statement of cash flows, indirect method, for the first quarter.
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