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 $ 156 $ 101

Accounts receivable 210 234

Investment revenue receivable 27 24

Inventory 228 220

Prepaid insurance 25 33

Long-term investment 217 145

Land 236 170

Buildings and equipment 432 440

Less: Accumulated depreciation (118) (160)

Patent 52 55

$ 1,465 $ 1,262

Liabilities

Accounts payable $ 70 $ 105

Salaries payable 27 38

Bond interest payable 29 24

Income tax payable 32 40

Deferred income tax liability 51 28

Notes payable 33 0

Lease liability 102 0

Bonds payable 235 315

Less: Discount on bonds (42) (50)

Shareholders Equity

Common stock 458 430

Paid-in capitalexcess of par 115 105

Preferred stock 95 0

Retained earnings 289 227

Less: Treasury stock (29) 0

$ 1,465 $ 1,262

ARDUOUS COMPANY

Income Statement

For Year Ended December 31, 2016

($ in millions)

Revenues and gain:

Sales revenue $ 600

Investment revenue 31

Gain on sale of treasury bills 3 $ 634

Expenses and loss:

Cost of goods sold 200

Salaries expense 93

Depreciation expense 13

Patent amortization expense 3

Insurance expense 27

Bond interest expense 48

Loss on machine damage 33

Income tax expense 56 473

Net income $ 161

Additional information from the accounting records:

a.

Investment revenue includes Arduous Companys $27 million share of the net income of Demur Company, an equity method investee.

b.

Treasury bills were sold during 2016 at a gain of $3 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

c.

A machine originally costing $110 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 $23 million.

e.

The preferred stock of Tory Corporation was purchased for $45 million as a long-term investment.

f.

Land costing $66 million was acquired by issuing $33 million cash and a 15%, four-year, $33 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, $102 million.

h.

$80 million of bonds were retired at maturity.

i. In February, Arduous issued a 4% stock dividend (5 million shares). The market price of the $7 par value common stock was $9.50 per share at that time.

j.

In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $29 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.).)

ReferenceseBook & Resources

Financial StatementsLearning Objective: 21-04 Determine cash flows from operating activities by the indirect method.

Difficulty: 3 HardLearning Objective: 21-08 Prepare a statement of cash flows with the aid of a spreadsheet or T-accounts.

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