Question: Chaplin Arts Inc s comparative balance sheets for December 31 2014

Chaplin Arts, Inc.’s comparative balance sheets for December 31, 2014 and 2013 follow.

The following additional information about Chaplin Arts’s operations during 2013 is available:
(a) Net income, $28,000;
(b) Building and equipment depreciation expense amounts, $15,000 and $3,000, respectively;
(c) Equipment that cost $13,500 with accumulated depreciation of $12,500 sold at a gain of $5,300;
(d) Equipment purchases, $12,500;
(e) Patent amortization, $3,000; purchase of patent, $1,000;
(f) Funds borrowed by issuing notes payable, $25,000; notes payable repaid, $15,000;
(g) Land and building purchased for $162,000 by signing a mortgage for the total cost;
(h) 1,500 shares of $20 par value common stock issued for a total of $50,000;
(i) Paid cash dividends, $9,000.

1. Using the indirect method, prepare a statement of cash flows for Chaplin Arts.
2. Why did Chaplin Arts have an increase in cash of $67,200 when it recorded net income of only $28,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) What is your assessment of Chaplin Arts’ cash-generatingability?

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  • CreatedMarch 26, 2014
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