A comparative balance sheet and an income statement for Burgess Company are give

Question

A comparative balance sheet and an income statement for Burgess Company are given below:

Burgess also provided the following information:

The company sold equipment that had an original cost of $42 million and accumulated depreciation of $22 million. The cash proceeds from the sale were $22 million. The gain on the sale was $2 million.

Using the indirect method, prepare a statement of cash flows for the year. (Enter your answers in millions not in dollars . List any deduction in cash and cash outflows as negative amounts.)

  

A comparative balance sheet and an income statement for Burgess Company are given below:

Burgess Company
Comparative Balance Sheet
(dollars in millions) Ending Balance Beginning Balance   Assets   Current assets:      Cash and cash equivalents $ 54    $ 111         Accounts receivable   790    723         Inventory 725    670      Total current assets 1,569    1,504      Property, plant, and equipment 1,655    1,619         Less accumulated depreciation 860    696      Net property,plant, and equipment 795    923      Total assets
$ 2,364    $ 2,427      Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 290    $ 175         Accrued liabilities 195    155         Income taxes payable 107    87      Total current liabilities 592    417      Bonds payable 490    750   
  Total liabilities 1,082    1,167      Stockholders' equity:      Common stock 220    220         Retained earnings 1,062    1,040      Total stockholders' equity 1,282    1,260   
  Total liabilities and stockholders' equity $ 2,364    $ 2,427   

Burgess Company
Income Statement
(dollars in millions)   Sales $ 4,150       Cost of goods sold 2,840       Gross margin 1,310       Selling and administrative expenses 910       Net operating income 400       Nonoperating items: Gain on sale of equipment 2       Income before taxes 402       Income taxes 142       Net income $ 260    

Burgess also provided the following information:

1.

The company sold equipment that had an original cost of $42 million and accumulated depreciation of $22 million. The cash proceeds from the sale were $22 million. The gain on the sale was $2 million.

2. The company did not issue any new bonds during the year. 3. The company paid a cash dividend during the year. 4. The company did not complete any common stock transactions during the year. Required: 1.

Using the indirect method, prepare a statement of cash flows for the year. (Enter your answers in millions not in dollars . List any deduction in cash and cash outflows as negative amounts.)

  

Explanation / Answer

Indirect method of cash flow Net income 260 Gain on sale of equipment -2 increase in accounts receivable -67 increase in inventory -55 Depreciation expense 186 increase in accounts payable 115 increase in accrued liabilities 40 increase in income tax payable 20 497 Net cash flow from operating activities 497 Cash flow from investing activities cash from sale 22 purchase of equipment -78 -56 cash used by investing activities -56 Cash flow from financing activities bonds paid -260 cash dividend -238 -498 Cash used by financing activities -498 Net decrease -57 Cash at the beginning 111 Cash at end 54

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