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 $56 million and accumulated depreciation of $29 million. The cash proceeds from the sale were $29 million. The gain on the sale was $2 million.

The company did not issue any new bonds during the year.

The company paid a cash dividend during the year.

The company did not complete any common stock transactions during the year.

Required:

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.)

Burgess Company
Comparative Balance Sheet
(dollars in millions) Ending Balance Beginning Balance Assets Current assets: Cash and cash equivalents $ 61 $ 125 Accounts receivable 860 786 Inventory 760 698 Total current assets 1,681 1,609 Property, plant, and equipment 1,725 1,682 Less accumulated depreciation 902 717 Net property,plant, and equipment 823 965 Total assets $ 2,504 $ 2,574 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 304 $ 182 Accrued liabilities 202 148 Income taxes payable 121 94 Total current liabilities 627 424 Bonds payable 525 820 Total liabilities 1,152 1,244 Stockholders' equity: Common stock 255 255 Retained earnings 1,097 1,075 Total stockholders' equity 1,352 1,330 Total liabilities and stockholders' equity $ 2,504 $ 2,574

Explanation / Answer

Statement of cash flow cash from operating activities net income for the year 302 Adjustments Depreciation expense 902 - (717-29) 214 gain on sale -2 increase in accounts receivable -74 increase in inventory -62 incrrease in accounts payable 122 increase in accrured liabilities 54 increase in income taxes payable 27 cash from operating activities 581 Cash from investing activities Cash from sale of Equipment 29 purchase of PPE 1725 - (1682-56) -99 Cash used by investing activities -70 Cash from financing activities Redemption of bonds -295 Cash dividend paid 1097 - (1075+302) -280 Cash used by financing activities -575 -575 net decrease in cash -64 Cash at the beginning of the year 125 Cash at year end 61

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