P5-5 4 Appendix 5A) Preparing the Statement of Cash Flows with Sale of Equipment (Indirect Method) (CAP5-5) (L05-2,5-3,5-5, L5-S1 The following information has been reported by Laporte Inc. on its statements of financial position at December 31, 2019 and 2020 and on its statement of earnings for the year ended December 31, 2020. Amounts are in millions of dollars: Statements of Financial Position 2020 2019 Cash $ 90 $ 68 Accounts receivable 34 24 Merchandise inventory 28 32 Long-term investments - 18 Property, plant, and equipment 196 154 Accumulated depreciation (78) (96 Total assets $270 $200 Accounts payable $ 24 $ 38 Income taxes payable 3 4 Long-term borrowings 80 20 Contributed capital 115 100 Retained earnings 48 38 Total liabilities and shareholders' equity $270 $200 Statement of Earnings Sales $140 Sales $140 (84) 56 Cost of sales Gross profit Depreciation expense Other operating expenses (10) (34) Earnings from operations 12 Gain on sale of investments 6 (2) Loss on sale of equipment Earnings before income tax Income tax expense 16 Net earnings $ 12 Additional information is as follows: a. Old equipment was sold for cash during 2020. It had an original cost of $40 and an accumulated depreciation of $28. b. A new building was acquired during the year in exchange for a long-term note for $60, payable in five years. In addition, new equipment was purchased for cash. Required: 1. Prepare the operating activities section of the statement of cash flows for Laporte Inc. for the year ended December 31, 2020. Use the indirect method to report the cash flow from operations. 2. Prepare the investing activities section of the statement of cash flows for Laporte Inc. for the year ended December 31, 2020. 3. Compute and explain each of the following for the year 2020: (a) quality of earnings ratio. (b) capital expenditures ratio, and (c) free cash flow. 4. Based on your answers to (1) and (2) above, determine the net cash flow from financing activities. (Hint: This can be done without preparing the financing activities section of the statement.) 5. The president of Laporte Inc., Tanya Turcotte, was provided with a copy of the operating activities section of the statement of cash flows that you prepared in (1), and made the following comment: "This report is supposed to show operating cash inflows and outflows during the year, but I don't see how much cash Laporte Inc. received from customers and how much it paid to trade suppliers and for income taxes. Please ask whoever prepared this statement to provide me with these numbers." Based on Tanya's comment, compute the following amounts for 2020: Page 297 a Cash collected from customers b. Cash paid to trade suppliers c. Cash paid for income taxes