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related to Dubois Inc.
(a) Dubois Inc. has $600,000 to invest. The company is trying to decide
between two alternative uses ofthe funds. One alternative provides
$80,000 at the end of each year for 12 years
(b) Dubois Inc. has completed the purchase of new Dell computers.
The fair value of the equipment is$824,150. The purchase agreement
specifies an immediate down payment of $200,000
(c) Dubois Inc. loans money to John Kruk Corporation in the amount
of $800,000. Dubois acceptsan 8% note due in 7 years with interest
payable semiannually. After 2 years (
(d) Dubois Inc. wishes to accumulate $1,300,000 by December 31,
2022, to retire bonds outstanding. Thecompany deposits $200,000 on
December 31, 2012, which will earn interest at 10%
P23-7 (SCF—Direct and Indirect Methods from Comparative
Financial Statements) Chapman Company,
a major retailer of bicycles and accessories, operates several stores and
is a publicly traded company.
The comparative balance sheet and income statement for Chapman as
of May 31, 2012, are shown on thenext page. The company is
preparing its statement of cash flows.
(a) Compare and contrast the direct method and the indirect method
for reporting cash flows from
operating activities.
The direct method reports the net cash flows from operations as
consolidated points. That means the cash collected from customers
along with the cash generated from interest and dividends are reported
under a single item