The comparative balance sheets for 2016 and 2015 and the income statement for 20

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 $15 million share of the net income of Demur Company, an equity method investee.

Treasury bills were sold during 2016 at a gain of $1 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

A machine originally costing $90 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $20 million.

Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $13 million.

The preferred stock of Tory Corporation was purchased for $35 million as a long-term investment.

Land costing $66 million was acquired by issuing $33 million cash and a 10%, four-year, $33 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, $92 million.

In February, Arduous issued a stock dividend (6 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. Also the company paid a cash dividend.

   

Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2016. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

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.

ARDUOUS COMPANY Statement of Cash Flows For year ended December 31, 2016 (S in millions) Adjustments for noncash Changes in operating assets and liabilities

Explanation / Answer

CASH FLOW FROM OPERATING ACTIVITIES BY DIRECT METHOD:

CASH RECIEPT FRM CUSTOMER (1)

CASH PAYMENTS :(B)

RIGHT TO USE BUILDING(LEASE PAYMENTS) TO SUPPLIERS(2)

($6.13)

(221)

PURCHASE OF LAND   ($33)

PURCHASE OF PREFERED STOCK ($35)

SALE OF MACHINERY $20

PURCHASE OF STOCK DIVIDEND ( $6)

INCOME ON INVESTMENT $5

LOSS ON PATENT ( $1)

NET INCOME FROM INVESTING ACTIVITIES (B)

CASH FLOW FROM FINANCING ACTIVITIES:

RAISE NOTE PAYABLE FOR PURCHASE OF LAND ($33)

ISSUE OF COMMON STOCK $30

ISSUE OF CAPITAL $15

ISSUANCE OF PREFFERED STOCK 85

INCREASE IN RETAINED EARNINGS $34

LEASE (85.87)

PURCHASE OF TREASURY STOCK   ($19)

NET CASH FLOW FROM FINANCING ACTIVITIES (C)

  

PARTICULARS AMOUNT($)(MILLION) CASH RECIEPT FRM CUSTOMER (1)(A) 50

CASH PAYMENTS :(B)

RIGHT TO USE BUILDING(LEASE PAYMENTS) TO SUPPLIERS(2)

($6.13)

(221)

TO EMPLOYEES(3) (98) FOR PURCHASE OF PREPAID ASSETS(4) (8) INTEREST (5) (35) INCOME TAX (6) (52) TOTAL (B) (420.13) (A)NET CASH FLOW FROM OPERATING ACTIVITIES (A-B)
87.87

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.