Chapter 5 Accounting for Merchandise Operations 253Instructions
- Prepare a statement of cash flows, using the indirect method.
- Why is depreciation added to net income in determining net cash flows from operating
activities? Explain. - Net cash flows from
operating activities, $37,696
Chippendale Systems Inc.
Balance SheetsDecember 31, Changes
2007 2006 Increase (Decrease)
Assets
Current assets:
Cash $ 42,360 $ 33,200 $ 9,160
Accounts receivable 60,864 41,600 19,264
Merchandise inventory 49,720 47,760 1,960
Office supplies 384 480 (96)
Prepaid insurance 2,120 2,400 (280)
Total current assets $155,448 $125,440 $30,008
Property, plant, and equipment:
Land $ 16,000 $ 16,000 $ 0
Store equipment 21,680 16,000 5,680
Accumulated depreciation—store equipment (4,560) (2,080) (2,480)
Office equipment 12,456 8,000 4,456
Accumulated depreciation—office equipment (3,776) (1,784) (1,992)
Total property, plant, and equipment $ 41,800 $ 36,136 $ 5,664
Total assets $197,248 $161,576 $35,672Liabilities
Current liabilities:
Accounts payable $ 17,936 $ 11,416 $ 6,520
Notes payable (current portion) 4,000 4,000 0
Salaries payable 912 1,200 (288)
Unearned rent 1,440 1,920 (480)
Total current liabilities $ 24,288 $ 18,536 $ 5,752
Long-term liabilities:
Notes payable (final payment due 2012) 16,000 20,000 (4,000)
Total liabilities $ 40,288 $ 38,536 $ 1,752Stockholders’ Equity
Capital stock $ 20,000 $ 20,000 $ 0
Retained earnings 136,960 103,040 33,920
Total stockholders’ equity $156,960 $123,040 $33,920
Total liabilities and stockholders’ equity $197,248 $161,576 $35,672