Cash flows case:(indirect method).

Ronaldo Company has not yet prepared the statement of cash flows.The Balance sheet as of December 31, 2018 and January 1, 2018 and the additional information regarding the statement of income and retained earnings for the year are presented below.

Ronaldo Company

Comparative Balance Sheet

(Dollars in Millions)

Assets12/31/20181/1/2018

Current Assets:

Cash$ 98$158

Account Receivables 1,2901,160

Inventory1,3201,230

Total Current Assets2,7082,548

Property, Plant, and Equipment3,0302,932

Less Accumulated Depreciation 1,5301,282

Net Property, Plant, and Equipment1,500 1,650

Total Assets$4,208 $4,198

Liability and Equity

Current Liability:

Account payable$500$310

Accrued Liability 380330

Income tax payable152140

Total current Liability$1,032 $780

Bonds payable9001,240

Total Liability1,9322,020

Stockholders' Equity:

Common Stock322322

Retained earnings1,9541,856

Total Stockholders' Equity2,2762,178

Total Liability and Stockholders' Equity$4,208$4,208

Ronaldo Income statement ((Dollars in Millions)

Net Income$7,200

Cost of goods sold5,100

Gross Margin2,100

Selling and administrative Expenses1,750

Net Operating Income 350

Nonoperation items:

Gain on sale of Equipment6

Income before Taxes356

Income tax126

Net Income$230

Ronaldo also provided the following information:

1.The company sold equipment that had an original cost of $26 million and accumulated depreciation of $16 million.The cash proceeds from the sale were $16 million.The gain on the sale was $6 million

2.The company did not issue any bonds during the year.

3.The company paid a cash dividend during the year

4.The company did not complete any common stock transactions during the year

Required:

1.Prepare a statement of cash flows for the year using the indirect method

2.Compute Ronaldo's free cash flow

3.Assume that Ronaldo has sales of $7,600, Net income of $230, and net cash provided by operating activities of $300 in the prior year.Prepare a memo that summarizes your interpretations of Ronaldo's financial performance

4.Use the analysis of Ronaldo Company to illustrate how information in the balance sheet and the statement of cash flows helps the users of the financial statements.