Problem 12-8A Prepare a Statement of Cash Flows [LO1, LO2]

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 $ 50 $ 18

Accounts receivable 306 228

Inventory 155 195

Prepaid expenses 9 5

Total current assets 520 446

Property, plant, and equipment 534 454

Less accumulated depreciation 86 70

Net property, plant, and equipment 448 384

Long-term investments 25 31

Total assets $ 993 $ 861

Liabilities and Stockholders' equity Accounts payable $ 304 $ 224

Accrued liabilities 71 78

Income taxes payable 75 65

Total current liabilities 450 367

Bonds payable 196 171

Total liabilities 646 538

Common stock 207 227

Retained earnings 140 96

Total stockholders equity 347 323

Total liabilities and stockholders' equity $ 993 $ 861

Eaton Company

Income Statement

For the Year Ended December 31, 2011

Sales $ 751

Cost of goods sold 445

Gross margin 306

Selling and administrative expenses 222

Net operating income 84

Nonoperating items: Gain on sale of investments $ 6

Loss on sale of equipment (2) 4

Income before taxes 88

Income taxes 24

Net income $ 64

During 2011, Eaton sold some equipment for $19 that had cost $31 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $12 that had cost $6 when purchased several years ago. A cash dividend was paid during 2011 and the company, repurchased $20 of its own stock. Eaton did not retire any bonds during 2011.

Required: 1. Using the indirect method, determine the net cash for operating activities for 2011. (Negative amount should be entered with a minus sign.) Net cash operating activities $

2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2011. (Amounts to be deducted and negative amounts should be indicated with a minus sign.)

Eaton Company

Statement of Cash Flows

For the Year Ended December 31, 2011

Operating activities:

$

Adjustments to convert net income to cash basis: $

Net cash operating activities Investing activities: Net cash investing activities Financing activities: Net cash financing activities Cash balance, January 1, 2011 Cash balance, December 31, 2011 $