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. ARDUOUS COMPANY Comparative Balance Sheets Decernber 31, 2016 and 2015 $ in millions) 2016 2015 Assets S 118 $ 82 196 191 Accounts receivable Investment revenue receivable 207 Prepaid insurance Long-term investment 160 199 413 (98) (122) 126 151 402 Buildings and equipment $1,236 $1,085 Liabilities Accounts payable Salaries payable Bond interest payable Income tax payable Deferred income tax liability Notes payable Lease liability Bonds payable S 51 S 67 12 10 13 13 24 216 (23) 277 (28) Less: Discount on bonds Shareholders' Equity Common stock Paid-in capital excess of par Preferred stack Retained earnings 411 435 76 (10) $ 1,236 Less: Treasury stock $ 1,085 ARDUOUS COMPANY ARDUOUS COMPANY Income Statement For Year Ended December 31, 2016 (S in millions) Revenues and gain: Sales revenue 5420 12 G435 Investment revenue Gain on sale of treasury bills Expenses and loss Cost of goods sold Salaries expense Depreciation expense Patent amortization expense Insurance expense Bond interest expense Loss on machine damage Income tax expense 181 74 12 29 20 37 364 Net income $ 71 Additional information from the accounting records: Investment revenue includes Arduous Company's $8 million share of the net income of Demur Company, an equity method investee. b. Treasury bills were sold during 2016 at a gain of $3 million. Arduous Company classifies its investments in Treasury bills as cash equivalents c. A machine originally costing $72 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $16 million. d. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $4 million. e. The prefered stack of Tory Corporation was purchased for $26 million as a long-term investment. f. Land costing $48 million was acquired by issuing $24 million cash and a 10%, four-year, $24 million note payable to the seller. g. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $83 million. h. $61 million of bonds were retired at maturity i. In February, Arduous issued a stock dividend (4 million shares). The market price of the $6 par value common stock was $8.50 per share at that time j. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $10 million. Required: Prepare the staterment of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Do not round your intermediate calculations. Enter Required: Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Do not round your intermediate calculations. Enter your answers in millions(i.e., 10,000,000 should be entered as 10.).) ARDUOUS COMPANY Statement of Cash Flows For year ended December 31, 2016 ($ in millions Cash flows from operating activities: Net income Adjustments for noncash effects: Changes in operating assets and liabilities: 8:41 PM d)4/23/2019 Type here to search

Answer 1

ARDUOUS COMPANY
Statement of Cash Flows
For year ended December 31, 2016 ($ in millions)
Cash flows from operating activities:
Net Income		$71
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount	$5
Depreciation Expense	$12
Patent amortization expense	$3
Loss on machine damage	$20
Changes in operating assets and liabilities:
Decrease in accounts receivable	$5
Increase in Investment Revenue Receivables	($3)
Increase in investment due to equity method income	($8)
Increase in Inventory	($6)
Decrease in Prepaid insurance	$3
Decrease Accounts payable	($16)
Decrease Salaries payable	($4)
Increase Bond interest payable	$5
Decrease Income tax payable	($7)
Increase Deferred income tax liability	$4	$13
Net cash flows from operating activities		$84
Cash flows from investing activities:
Sale of machine components	$16
Purchase of long-term investment	($26)
Purchase of land	($24)
Net cash flows from investing activities		($34)
Cash flows from financing activities:
Retirement of bonds payable	($61)
Sale of preferred stock	$76
Payment of cash dividends	($19)
Purchase of treasury stock	($10)
Net cash flows from financing activities		($14)
Net increase in cash		$36
Cash balance, January 1		$82
Cash balance, December 31		$118
Working Notes :-	2016	2015	Difference
Assets
Cash	$118	$82	$36
Accounts receivable	$191	$196	($5)
Investment revenue receivable	$8	$5	$3
Inventory	$207	$201	$6
Prepaid insurance	$6	$9	($3)
Long-term investment	$160	$126	$34
Land	$199	$151	$48
Buildings and equipment	$413	$402	$11
Less: Accumulated depreciation	($98)	($122)	$24
Patent	$32	$35	($3)
	$1,236	$1,085
Liabilities
Accounts payable	$51	$67	($16)
Salaries payable	$8	$12	($4)
Bond interest payable	$10	$5	$5
Income tax payable	$13	$20	($7)
Deferred income tax liability	$13	$9	$4
Notes payable	$24	$0	$24
Lease liability	$83	$0	$83
Bonds payable	$216	$277	($61)
Less: Discount on bonds	($23)	($28)	$5
Shareholders’ Equity	$0	$0
Common stock	$435	$411	$24
Paid-in capital—excess of par	$96	$86	$10
Preferred stock	$76	$0	$76
Retained earnings	$244	$226	$18
Less: Treasury stock	($10)	$0	($10)
	$841	$723
Payment of Dividend
Beginning RE	$226
Add: NI	$71
Less: Common stock purchased + Paid in capital	($34)
Ending RE	($244)
Payment of Dividend	$19