The comparative balance sheets for 2016 and 2015 and the income statement for 20
ID: 2590362 • Letter: T
Question
The comparative balance sheets for 2016 and 2015 and the income statement for 2016 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.
Investment revenue includes Arduous Company’s $11 million share of the net income of Demur Company, an equity method investee.
Treasury bills were sold during 2016 at a gain of $4 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
A machine originally costing $76 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $14 million.
Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $6 million.
The preferred stock of Tory Corporation was purchased for $28 million as a long-term investment.
Land costing $52 million was acquired by issuing $26 million cash and a 15%, four-year, $26 million note payable to the seller.
The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $85 million.
$63 million of bonds were retired at maturity.
In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $12 million.
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.).)
The comparative balance sheets for 2016 and 2015 and the income statement for 2016 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.
Explanation / Answer
Arduous Company
Statement of Cash Flows
For the year ended December 31, 2016
$ $ Cash Flows from Operating Activities Net Income ( $ 74 + $ 6 deferred tax expense) 80 Adjustments to reconcile net income to net cash flows from Operating Activities Depreciation Expense 11 Amortization Expense 4 Bond Interest Expense 31 Loss on machine damage 24 Investment Revenue (17) Gain on Sale of Treasury Bills (4) Decrease in accounts receivable 7 Increase in inventory (8) Decrease in prepaid expense 4 Decrease in accounts payable (18) Decrease in salaries payable (3) Decrease in income tax payable (5) 26 Net cash provided by operations 106 Cash Flows from Investing Activities Investment Revenue Received 13 Cash receipts from sale of damaged machine 14 Cash paid for long term investment (39) Cash paid for acquisition of land (26) Net cash used in investing activities (38) Cash Flows from Financing Activities Cash dividends paid (44.5) Bond interest paid (21) Bonds retired (59) Treasury stock purchased (12) Issuance of common stock for cash 28.5 Issuance of preferred stock 78 Net cash used in Financing Activities (30) Increase in cash and cash equivalents 38 Beginning cash and cash equivalents 84 Ending cash and cash equivalents 122