Portions of the financial statements for Myriad Products are provided below. MYR
ID: 2569647 • Letter: P
Question
Portions of the financial statements for Myriad Products are provided below.
MYRIAD PRODUCTS COMPANY
Income Statement
For the Year Ended December 31, 2016 ($ in millions)
Sales 720
COGs (252)
468
Gross Margin
Salaries expense $105
Depreciation exp 80
Patent Amort exp 5
Interest exp 20
Loss on sale of land (214)
Income before taxes 254
Income tax expense (127)
Net Income $127
MYRIAD PRODUCTS COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2016 and 2015 ($ in millions)
Year
2016 2015 Change
Cash $ 120 112 8
Accounts Receivable 232 250 (18)
Inventory 446 462 (16)
Accounts payable 170 158 12
Salaries payable 86 98 (12)
Interest payable 43 32 11
Income taxes payable 33 22 11
Required:
Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)
Cash Flows from Operating Activities:
Adjustments for noncash effects:
Changes in operating assets and liabilities:
Net Cash flows from operating activities $______________
Explanation / Answer
SOLUTION
A. Cash received from customers
= Accounts receivable + Sales revenue
= $18 + $720 = $738
B. Cash paid to suppliers
= Cost of goods sold - Inventory - Accounts payable
= $252 - $16 - $12 = $224
C. Cash Paid to employees
= Salaries expense + Salaries payable
= $105 + $12 = $117
D. Cash paif for interest
= Interest expense - Interest payable
= $20 - $11 = $9
E. Cash paid for income tax-
= Income tax expense - Income tax payable
= $127 - $11 = $116
Amount ($) Cash Flows from Operating Activities: Cash received from customers (A) 738 Cash decrease from sale of cash equivalents (4) Cash paid to suppliers (B) (224) Cash paid to employees (C) (117) Cash paid for interest (D) (9) Cash paid for income taxes (E) (116) Net cash flows from operating activities 268