Question
A comparative balance sheet and income statement for Eaton Company follow: Eaton Company Comparative Balance Sheet December 31, 2011 and 2010 2011 2010 Assets Cash
A comparative balance sheet and income statement for Eaton Company follow:
Eaton Company Comparative Balance Sheet December 31, 2011 and 2010 | ||||
2011 | 2010 | |||
Assets | ||||
Cash | $ | 4 | $ | 11 |
Accounts receivable | 310 | 230 | ||
Inventory | 160 | 195 | ||
Prepaid expenses | 8 | 6 | ||
Total current assets | 482 | 442 | ||
Property, plant, and equipment | 500 | 420 | ||
Less accumulated depreciation | 85 | 70 | ||
Net property, plant, and equipment | 415 | 350 | ||
Long-term investments | 31 | 38 | ||
Total assets | $ | 928 | $ | 830 |
Liabilities and Stockholders' Equity | ||||
Accounts payable | $ | 300 | $ | 225 |
Accrued liabilities | 70 | 80 | ||
Income taxes payable | 71 | 63 | ||
Total current liabilities | 441 | 368 | ||
Bonds payable | 195 | 170 | ||
Total liabilities | 636 | 538 | ||
Common stock | 160 | 200 | ||
Retained earnings | 132 | 92 | ||
Total stockholders equity | 292 | 292 | ||
Total liabilities and stockholders' equity | $ | 928 | $ | 830 |
Eaton Company Income Statement For the Year Ended December 31, 2011 | ||||
Sales | $ | 750 | ||
Cost of goods sold | 450 | |||
Gross margin | 300 | |||
Selling and administrative expenses | 223 | |||
Net operating income | 77 | |||
Nonoperating items: | ||||
Gain on sale of investments | $ | 5 | ||
Loss on sale of equipment | (2) | 3 | ||
Income before taxes | 80 | |||
Income taxes | 24 | |||
Net income | $ | 56 | ||
During 2011, Eaton sold some equipment for $18 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $12 that had cost $7 when purchased several years ago. A cash dividend was paid during 2011 and the company, repurchased $40 of its own stock. Eaton did not retire any bonds during 2011. |
Required: | |
1. | Using the direct method, adjust the companys income statement for 2011 to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.) |
Eaton Company Direct Method of Determining the Net Cash flows from Operating activities | ||
Sales | $ | |
Adjustments to a cash basis: | ||
$ | ||
Cost of goods sold | ||
Adjustments to a cash basis: | ||
Selling and administrative expenses | ||
Adjustments to a cash basis: | ||
Income taxes | ||
Adjustments to a cash basis: | ||
Net cash operating activities | $ | |
2. | Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Cash outflows and amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.) |
Eaton Company Statement of Cash Flows For the Year Ended December 31, 2011 | ||
Operating activities: | ||
Cash received from customers | $ | |
Less cash disbursements for: | ||
$ | ||
Total cash disbursements | ||
Net cash operating activities | ||
Investing activities: | ||
Net cash investing activities | ||
Financing activities: | ||
Net cash financing activities | ||
Cash balance, beginning | ||
Cash balance, ending | $ | |
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