Question
The comparative balance sheets for 2016 and 2015 and the income statement for 2016 are given below for Arduous Company. Additional information from Arduouss accounting
The comparative balance sheets for 2016 and 2015 and the income statement for 2016 are given below for Arduous Company. Additional information from Arduouss accounting records is provided also.
Check my workCheck My Work button is now enabled
Item10
Item 10 2.5 points Item Skipped
The comparative balance sheets for 2016 and 2015 and the income statement for 2016 are given below for Arduous Company. Additional information from Arduouss accounting records is provided also. |
ARDUOUS COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) | ||||
2016 | 2015 | |||
Assets | ||||
Cash | $ | 138 | $ | 92 |
Accounts receivable | 201 | 216 | ||
Investment revenue receivable | 17 | 15 | ||
Inventory | 219 | 211 | ||
Prepaid insurance | 15 | 23 | ||
Long-term investment | 189 | 136 | ||
Land | 218 | 161 | ||
Buildings and equipment | 423 | 422 | ||
Less: Accumulated depreciation | (107) | (142) | ||
Patent | 42 | 45 | ||
$ | 1,355 | $ | 1,179 | |
Liabilities | ||||
Accounts payable | $ | 61 | $ | 87 |
Salaries payable | 17 | 31 | ||
Bond interest payable | 19 | 15 | ||
Income tax payable | 23 | 30 | ||
Deferred income tax liability | 33 | 19 | ||
Notes payable | 28 | 0 | ||
Lease liability | 93 | 0 | ||
Bonds payable | 226 | 297 | ||
Less: Discount on bonds | (33) | (38) | ||
Shareholders Equity | ||||
Common stock | 453 | 421 | ||
Paid-in capitalexcess of par | 106 | 96 | ||
Preferred stock | 86 | 0 | ||
Retained earnings | 263 | 221 | ||
Less: Treasury stock | (20) | 0 | ||
$ | 1,355 | $ | 1,179 | |
ARDUOUS COMPANY Income Statement
ARDUOUS COMPANY Income Statement For Year Ended December 31, 2016 ($ in millions) | ||||||
Revenues and gain: | ||||||
Sales revenue | $ | 520 | ||||
Investment revenue | 21 | |||||
Gain on sale of treasury bills | 2 | $ | 543 | |||
Expenses and loss: | ||||||
Cost of goods sold | 191 | |||||
Salaries expense | 84 | |||||
Depreciation expense | 11 | |||||
Patent amortization expense | 2 | |||||
Insurance expense | 18 | |||||
Bond interest expense | 39 | |||||
Loss on machine damage | 24 | |||||
Income tax expense | 47 | 416 | ||||
Net income | $ | 127 | ||||
Additional information from the accounting records: | |
a. | Investment revenue includes Arduous Companys $17 million share of the net income of Demur Company, an equity method investee. |
b. | Treasury bills were sold during 2016 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents. |
c. | A machine originally costing $92 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $22 million. |
d. | Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $14 million. |
e. | The preferred stock of Tory Corporation was purchased for $36 million as a long-term investment. |
f. | Land costing $57 million was acquired by issuing $29 million cash and a 14%, four-year, $28 million note payable to the seller. |
g. | The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $93 million. |
h. | $71 million of bonds were retired at maturity. |
i. | In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $8 par value common stock was $10.50 per share at that time. |
j. | In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $20 million. |
Required: | |
Prepare the statement of cash flows for Arduous Company using the indirect method. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started