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Using the DIRECT METHOD, prepare a cash flow statement in accordance with U.S. GAAP. Income Statement , Year-ended December 31 (in millions) 2011 Sales $12,150

Using the DIRECT METHOD, prepare a cash flow statement in accordance with U.S. GAAP.

Income Statement , Year-ended December 31 (in millions)

2011

Sales

$12,150

Cost of goods sold

(8,900)

Salaries and wages

(1,240)

Depreciation

(625)

Other operating expense

(1,100)

Gain on sale of equipment1

120

Interest expense

(145)

Income tax expense

(84)

Net income

$176

1 Book value of equipment was $880.

Balance Sheet

As of December 31 (in millions)

2011

2010

Cash

$580

$350

Accounts receivable

472

510

Inventory

1,640

1,725

Prepaid expenses

82

68

Property, plant and equipment, net

4,480

4,845

Total assets

$7,254

$7,498

Accounts payable

$1,490

$1,620

Salaries payable

42

48

Interest payable

48

35

Income tax payable

32

60

Other accrued liabilities

450

540

Long-term debt

1,583

1,557

Common stock

2,175

2,070

Retained earnings

1,434

1,568

Total liabilities and equity

$7,254

$7,498

1. Cash collections are closest to

12,112

12,150

12,188


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