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. |
ARDUOUS COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) | ||||
2016 | 2015 | |||
Assets | ||||
Cash | $ | 128 | $ | 87 |
Accounts receivable | 196 | 206 | ||
Investment revenue receivable | 14 | 10 | ||
Inventory | 212 | 206 | ||
Prepaid insurance | 12 | 19 | ||
Long-term investment | 176 | 131 | ||
Land | 208 | 156 | ||
Buildings and equipment | 418 | 412 | ||
Less: Accumulated depreciation | (103) | (132) | ||
Patent | 36 | 40 | ||
$ | 1,297 | $ | 1,135 | |
Liabilities | ||||
Accounts payable | $ | 56 | $ | 77 |
Salaries payable | 14 | 22 | ||
Bond interest payable | 16 | 10 | ||
Income tax payable | 18 | 21 | ||
Deferred income tax liability | 23 | 14 | ||
Notes payable | 26 | 0 | ||
Lease liability | 88 | 0 | ||
Bonds payable | 221 | 287 | ||
Less: Discount on bonds | (28) | (30) | ||
Shareholders Equity | ||||
Common stock | 446 | 416 | ||
Paid-in capitalexcess of par | 106 | 91 | ||
Preferred stock | 81 | 0 | ||
Retained earnings | 245 | 227 | ||
Less: Treasury stock | (15) | 0 | ||
$ | 1,297 | $ | 1,135 | |
ARDUOUS COMPANY Income Statement For Year Ended December 31, 2016 ($ in millions) | ||||||
Revenues and gain: | ||||||
Sales revenue | $ | 452 | ||||
Investment revenue | 20 | |||||
Gain on sale of treasury bills | 4 | $ | 476 | |||
Expenses and loss: | ||||||
Cost of goods sold | 186 | |||||
Salaries expense | 79 | |||||
Depreciation expense | 12 | |||||
Patent amortization expense | 4 | |||||
Insurance expense | 13 | |||||
Bond interest expense | 34 | |||||
Loss on machine damage | 27 | |||||
Income tax expense | 42 | 397 | ||||
Net income | $ | 79 | ||||
Additional information from the accounting records: | |
a. | Investment revenue includes Arduous Companys $14 million share of the net income of Demur Company, an equity method investee. |
b. | Treasury bills were sold during 2016 at a gain of $4 million. Arduous Company classifies its investments in Treasury bills as cash equivalents. |
c. | A machine originally costing $82 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $14 million. |
d. | Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $9 million. |
e. | The preferred stock of Tory Corporation was purchased for $31 million as a long-term investment. |
f. | Land costing $52 million was acquired by issuing $26 million cash and a 12%, four-year, $26 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, $88 million. |
h. | $66 million of bonds were retired at maturity. |
i. | In February, Arduous issued a 6% stock dividend (5 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. |
j. | In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $15 million. |
Required: | |
Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.).) **Statement of cashflow must be in the following format: !!! Cash flows from operating activities: Net income Adjustments for noncash effects: Depreciation expense: Patent amortization expense: Amortization of discount: Loss on machine damage: Changes in operating assets and liabilities: Decrease in accounts receivable Increase in investment revenue receivable Increase in investment due to equity method income Decrease in prepaid insuranceIncrease in inventory Decrease in accounts payable Decrease in salaries payable Increase in interest payable Decrease in income tax payable Increase in deferred tax liability Net cash flows from operating activities: Cash flows from financing activities: Retirement of bonds payable Sale of preferred stock Payment of cash dividends Purchase of treasury stock Net cash flows from investing activities: Cash flows from financing activities: Retirement of bonds payable Sale of preferred stock Payment of cash dividends Purchase of treasury stock Net cash flows from financing activities: Net increase in cash: Cash balance, January 1 Cash balance, December 31 Noncash investing and financing activities: Acquired building with lease Acquired land with cash and note
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