ARDUOUS COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 2017 $ $ 99 230 145 208 26 226 22 Assets Cash Accounts receivable Investment revenue receivable Inventory Prepaid insurance Long-term investment Land Buildings and equipment Less: Accumulated depreciation Patent 24 212 232 430 (115) 49 $ 1,437 218 31 143 168 436 (156) 53 $ 1,244 $ ******* Liabilities Accounts payable Salaries payable Bond interest payable Income tax payable Deferred income tax liability Notes payable Lease liability Bonds payable Less: Discount on bonds Shareholders' Equity Common stock Paid-in capital-excess of par Preferred stock Retained earnings Less: Treasury stock 68 $ 101 26 36 28 22 30 36 4726 320 93 0 233 311 (40) (44) 428 103 0 484 131 93 239 (27) $ 1,437 225 $ 1,244 $ 582 32 4 $ 618 ARDUOUS COMPANY Income Statement For Year Ended December 31, 2018 ($ in millions) Revenues and gain! Sales revenue Investment revenue Gain on sale of treasury bills Expenses and loss: Cost of goods sold Salaries expense Depreciation expense Patent amortization expense Insurance expense Bond interest expense Loss on machine damage Income tax expense Net income 198 25 465 $ 153 Additional information from the accounting records: a. Investment revenue includes Arduous Company's $26 million share of the net income of Demur Company, an equity method investee. b. Treasury bills were sold during 2018 at a gain of $4 million. Arduous Company classifies its investments in Treasury bills as cash equivalents. c. A machine originally costing $106 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $18 million. d. Temporary differences between pretax accounting income and taxable income caused the deferred Income tax liability to increase by $21 million. e. The preferred stock of Tory Corporation was purchased for $43 million as a long-term investment. f. Land costing $64 million was acquired by issuing $32 million cash and a 10%, four-year, $32 million note payable to the seller. Check my work g. The right to use a building was acquired with a 15-year lease agreement: present value of lease payments, $100 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2018 h. $78 million of bonds were retired at maturity. 1. In February, Arduous issued a stock dividend (11.2 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. Also the company paid a cash dividend. J. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $27.00 million. Required: Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in millions (.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.) ARDUOUS COMPANY Statement of Cash Flows For year ended December 31, 2018 ($ in millions) Cash flows from operating activities: Cash inflows: From customers From investment revenue From sale of cash equivalents Cash outflows: To suppliers of goods To employees For insurance (18) upp ur yuuus To employees For insurance For bond interest For income taxes (39) (55) 1 596 (43) (32) (Net cash flows from operating activities Cash flows from investing activities: Sale of machine components Purchase of long-term investment Purchase of land - cash portion Net cash flows from investing activities Cash flows from financing activities: Retirement of bonds payable Payment on lease liability Sale of preferred stock Payment of cash dividends Purchase of treasury stock (28) (27) Net cash flows from financing activities Net increase in cash Cash balance, January 1 Cash balance, December 31 Noncash investing and financing activities: (43) (32) VI (57) Purchase of long-term investment Purchase of land - cash portion Net cash flows from investing activities Cash flows from financing activities: Retirement of bonds payable Payment on lease liability Sale of preferred stock Payment of cash dividends Purchase of treasury stock (78) (28) Net cash flows from financing activities Net increase in cash Cash balance, January 1 Cash balance, December 31 Noncash investing and financing activities: Acquired land with cash and note Acquired building with lease