The income statement and statement of cash flows for ABC Equipment Company for 2017 are provided below.
ABC Equipment Company
Income Statement for the Year Ended December 31, 2017
($ in millions)
Sales...................................................$81,860.0
Gain on the sale of marketable securities................83.2
Equity in earnings of affiliates...........................856.0
Total revenues and gains..............................82,799.2
Cost of goods sold....................................39,853.2
General and administrative expenses...............22,280.8
Interest expense.......................................11,549.2
Income tax expense....................................3,646.4
Total expenses.........................................77,329.6
Net income............................................$ 5,469.6
ABC Equipment Company
Statement of Cash Flows for Year Ended December 31, 2017
Operations
Net income....................................................$ 5,469.6
Adjustments for noncash transactions:
Depreciation.....................................................2,656.0
Increase in deferred tax liability................................328.0
Equity in undistributed earnings of affiliates...............(188.4)
Gain from sale of marketable securities.......................(83.2)
(Increase) decrease in accounts receivable....................298.4
(Increase) decrease in inventories............................(795.6)
(Increase) decrease in prepayments..........................(161.2)
Increase (decrease) in accounts payable for inventory......135.6
Increase (decrease) in other current liabilities..............(443.2)
Cash flow from operations...................................7,216.0
Investing
Sale of marketable securities..................................199.2
Acquisition of marketable securities........................(292.8)
Acquisition of property, plant, and equipment.........(3,502.8)
Acquisition of subsidiaries...................................(178.0)
Cash flow from investing activities......................(3,774.4)
Financing
Common stock issued to employees.........................137.6
Repurchase of common stock...............................(403.6)
Dividends paid to stockholders.............................(971.6)
Additions to short-term borrowing...........................510.4
Additions to long-term debt..................................486.4
Payments on long-term debt..............................(1,905.6)
Cash flow from financing activities......................(2,146.4)
Net change in cash..........................................1,295.2
Beginning of year cash balance...........................2,027.2
End of year cash balance.................................$ 3,322.4
Supplemental Information:
Other current liabilities represent obligations for general and administrative expenses.
Required:
Derive a direct method presentation of cash flow from operating activities for ABC Equipment Company. Assume all depreciation is included in General and administrative expenses.