Problem 23-7 (Part Level Submission)

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 COMPARATIVE BALANCE SHEET AS OF MAY 31
		2014		2013
Current assets
Cash		$29,230		$20,310
Accounts receivable		75,270		58,040
Inventory		220,960		250,730
Prepaid expenses		9,733		8,000
Total current assets		335,193		337,080
Plant assets
Plant assets		600,430		502,260
Less: Accumulated depreciationplant assets		150,750		125,840
Net plant assets		449,680		376,420
Total assets		$784,873		$713,500
Current liabilities
Accounts payable		$123,770		$116,000
Salaries and wages payable		47,680		72,950
Interest payable		27,380		25,350
Total current liabilities		198,830		214,300
Long-term debt
Bonds payable		70,420		100,700
Total liabilities		269,250		315,000
Stockholders equity
Common stock, $10 par		370,810		280,260
Retained earnings		144,813		118,240
Total stockholders equity		515,623		398,500
Total liabilities and stockholders equity		$784,873		$713,500

CHAPMAN COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2014
Sales revenue		$1,255,780
Cost of goods sold		722,890
Gross profit		532,890
Expenses
Salaries and wages expense		252,180
Interest expense		75,080
Depreciation expense		24,910
Other expenses		8,530
Total expenses		360,700
Operating income		172,190
Income tax expense		43,970
Net income		$128,220

The following is additional information concerning Chapmans transactions during the year ended May 31, 2014.

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 $98,170 were purchased by paying $18,770 in cash and issuing 7,940 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 1,115 shares of common stock at par value.
7.		7. Cash dividends of $101,647 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.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Cash payments: CHAPMAN COMPANY Statement of Cash Flows (Partial) For the Year Ended May 31, 2014