Question
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
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.
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