Problem 5 (40%)

Chopin Companys comparative statement of financial position and income statement as of December 31, 2019, are shown below:

Chopin Company

Comparative statement of financial position

	2019	2018
Plant Assets
Plant assets	$600,000	$502,000
Less: Accumulated depreciation	150000	125,000
	450,000	377,000
Current assets
Inventory	220,000	250,000
Prepaid expenses	9,000	7,000
Accounts receivable	75,000	58,000
Cash	28,250	20,000
Total current assets	332,250	335,000
Total assets	$782,250	$712,000
Equity
Share capital -ordinary,$10	$370,000	$280000
Retained Earnings	145,000	120,000
	515,000	400,000
Non-current liabilities
Bonds Payable	70,000	100,000
Current liabilities
Accounts payable	123,000	115,000
Salaries and wages payable	47,250	72,000
Interest payable	27,000	25,000
Total current liabilities	197,250	212,000
Total liabilities	267,250	312,000
Total equity and liabilities	$782,250	$712,000
Chopin Company Income statement For the year ended December 31, 2019
Sales Revenue	$1,255,250
Cost of goods sold	722,000
Gross Profit	533,250
Expenses
Operating expense	285,250
interest expense	75,000
total expenses	360,250
Operating income	173,000
Income tax expense	43,000
Net income	130,000

The following is additional information concerning Chopins transactions during the year ended December 31, 2019:

1. Plant assets costing $98,000 were purchased by paying $28,000 in cash and issuing 7,000 ordinary shares.

2. Chopin issued additional 2,000 ordinary shares at par value for cash.

3. Cash dividends of $105,000 were declared and paid.

4. Depreciation expense is included in the operating expenses.

Instructions:

a) Prepare a statement of cash flows for Chopin Company for the year ended December 31, 2019, using the direct method. Be sure to support the statement with appropriate calculations.

b) Using the indirect method calculate only the net cash flows from operating activities. Be sure to support the statement with appropriate calculations.