The following financial statements and additional information for the Quick Company are reported below:
Required: Prepare a statement of cash flows for the year ended December 31, 20x8 using the Indirect Method (List any deduction in cash and cash outflows as negative amounts.)
Quick Company Income Statement For the year ended December 31, 20x8 (dollars in millions) Sales $4,210 Cost of goods sold Gross profit Selling and administrative expenses Net operating expenses Nonoperating expenses: 2,880 1,330 914 416 Gain on the sale of machine 2 Income before taxes 418 Income taxes expense 146 Net income $272 Additional Information: a) A $270 million bonds payable is retired at its $270 million carrying (book) value in exchange for cash b) The only changes affecting retained earnings is net income and cash dividends paid. c) Sold a machine with an original cost of $46 million and accumulated depreciation of $24 million. Received cash for the sale of $24 million, resulting in a gain of $2 million. d) Purchased machine for $84 million in 20x8. Total depreciation expense for all assets in 20x8 was $194 million e) Cash dividends paid in 20x8 were $250 million. Part 1: Calculate the amount of change in each balance sheet account Quick Company Comparative Balance Sheet December 31, 20x8 and 20x7 Change (dollars in millions) in Amount 20x8 20x7 Assets: Current assets: Cash and cash equivalents $56 $115 $0 $0 Accounts receivable 810 741 $0 Inventory 735 678 Total current assets 1,601 1,534 $0 Property, plant, and equipment 1,637 1,675 $0 Less: Accum. Depreciation 872 702 |Net property, plant, and equipment Total Assets 803 935 $2,404 $2,469 Liabilities and equity Current liabilities $177 $0 Accounts payable $294 Salaries payable $0 197 153 $0 Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: 111 89 602 419 $0 500 770 1,102 1,189 $0 Common stock 230 230 $0 Retained earnings 1,072 1,050 Total stockholders' equity Total Liabilities and Stockholders' Equity 1,302 1,280 $2,404 $2,469 Part 2: Prepare the Cashflow statement using the indirect method. Quick Company Statement of Cash Flows -Indirect Method For the year ended December 31, 20x8 (dollars in millions) Operating Activities Adjustments to convert net income to a cash basis Net cash provided by (used in) operating activities Investing Activities Net cash provided by (used in) investing activities Financing Activities Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Beginning cash and cash equivalents Ending cash and cash equivalents summarizing your analysis of Quick Company's financial performance Part 3: Prepare a memo Quick Company Comparative Balance Sheet December 31, 20x8 and 20x7 (dollars in millions) 20x8 20x7 Assets: Current assets Cash and cash equivalents $56 $115 Accounts receivable 810 741 678 Inventory 735 Total current assets 1,601 1,534 Property, plant, and equipment 1,675 1,637 Less: Accum. Depreciation 872 702 Net property, plant, and equipment |Total Assets 803 935 $2,469 $2,404 Liabilities and equity Current liabilities: $294 $177 Accounts payable Salaries payable 197 153 Income taxes payable 111 89 Total current liabilities Bonds payable 602 419 500 770 Total liabilities Stockholders' equity: 1,189 1,102 Common stock 230 230 Retained earnings Total stockholders' equity Total Liabilities and Stockholders' Equity 1,072 1,050 1,302 1,280 $2,404 $2,469
