A comparative balance sheet and an income statement for Burgess Company are give
ID: 2564205 • Letter: A
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 $38 million and accumulated depreciation of $20 million. The cash proceeds from the sale were $20 million. The gain on the sale was $2 million.
Using the indirect method, prepare a statement of cash flows for the year. (Enter your answers in millions not in dollars . List any deduction in cash and cash outflows as negative amounts.)
A comparative balance sheet and an income statement for Burgess Company are given below:
Explanation / Answer
Statement of Cash Flows for Burgess Company
(using Indirect Method)
Amount (M$)
Net Profit for the current year
248.00
Adj.:
Depreciation (Note 1)
178.00
Gain on sale of Machinery (Shown in Investing activities)
-2.00
176.00
Change in Current assets and liabilities:
Increase in Acc Rec
-65.00
Increase in Inventory
-53.00
Increase in Acc Payable
113.00
Increase in Acc liabilities
36.00
Increase in IT Provision
18.00
49.00
Net Cash flow from Operation Activities
473.00
Cash flow from Investing Activities:
Sale of Machinery
20.00
Purchase of Machinery (1601-38-1635)
-72.00
-52.00
Cash flow from Financing Activities:
Redemption of Bonds
-250.00
Dividend paid (1030+248-1052) -Note 2
-226.00
-476.00
Net cash generated during the year
-55.00
Opening balance
107.00
Closing cash balance
52.00
Note 1 :
Calculation of CY depreciation
Opening Acc Dep
690.00
(-) Acc dep gone on sale of Machinery
-20.00
670.00
Closing Acc depreciation
848.00
Current Year depreciation
178.00
Note 2 :
For Dividend, opening Ret earnings were 1030, CY earnings are 248 and Closing remains only 1052, hence the differential portion has been paid as dividend.
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Statement of Cash Flows for Burgess Company
(using Indirect Method)
Amount (M$)
Net Profit for the current year
248.00
Adj.:
Depreciation (Note 1)
178.00
Gain on sale of Machinery (Shown in Investing activities)
-2.00
176.00
Change in Current assets and liabilities:
Increase in Acc Rec
-65.00
Increase in Inventory
-53.00
Increase in Acc Payable
113.00
Increase in Acc liabilities
36.00
Increase in IT Provision
18.00
49.00
Net Cash flow from Operation Activities
473.00
Cash flow from Investing Activities:
Sale of Machinery
20.00
Purchase of Machinery (1601-38-1635)
-72.00
-52.00
Cash flow from Financing Activities:
Redemption of Bonds
-250.00
Dividend paid (1030+248-1052) -Note 2
-226.00
-476.00
Net cash generated during the year
-55.00
Opening balance
107.00
Closing cash balance
52.00
Note 1 :
Calculation of CY depreciation
Opening Acc Dep
690.00
(-) Acc dep gone on sale of Machinery
-20.00
670.00
Closing Acc depreciation
848.00
Current Year depreciation
178.00
Note 2 :
For Dividend, opening Ret earnings were 1030, CY earnings are 248 and Closing remains only 1052, hence the differential portion has been paid as dividend.
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