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

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

Chaplin Arts, Inc.

Comparative Balance Sheets

December 31, 2014 and 2013

2014

2013

Assets

Cash

$94,560

$27,360

Accounts receivable, net

102,430

75,430

Inventory

112,890

137,890

Prepaid expenses

--

20,000

Land

25,000

--

Building

137,000

--

Accumulated depreciation, building

(15,000)

--

Equipment

33,000

34,000

Accumulated depreciation, equipment

(14,500)

(24,000)

Patents

4,000

6,000

TOTAL ASSETS

$479,380

$276,680

Liabilities and Equity

Accounts payable

$10,750

$36,750

Notes payable (current)

10,000

--

Accrued liabilities

--

12,300

Mortgage payable

162,000

--

Common stock, $10 par value

180,000

150,000

Additional paid-in capital

57,200

37,200

Retained earnings

59,430

40,430

TOTAL Liab. and Equity

$479,380

$276,680

The following additional information about Chaplin Arts’ 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; and (i) paid cash dividends, $9,000.

REQUIRED

Using the indirect method, prepare a statement of cash flows for Chaplin Arts.

ACCOUNTING CONNECTION> Why did Chaplin Arts have an increase in cash of $67,200 when it recorded net income of only $28,000?Discuss and interpret.[This must be answered separately from the provided template.]

BUSINESS APPLICATION>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-generating ability?[Answer this separately from the provided template.]

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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