Question

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:

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.)

Answer 1

260 Burgess Company Statement of Cash flows For the Year Ended Cash flows from Operating Activities: Net Income Adjustments to reconcile Net Income to Net Cash flows from Operating activities Depreciation expenses 186 Gain on sale of equipment (2) Increase in Accounts Receivables (67) Increase in Inventory Increase in accounts payable 115 Increase in Accured liabilities 40 Increase in Income taxes payable 20 $ Net Cash flow from operating activities S Cash Flows from Investing Activities Purchase of Equipment $ Sale of Equipment S22 Net Cash flow from investing activities (55) 237 497 (56

S S (238) (260) Cash Flows from Financing Activities Payment of dividends Repayment of Bonds payable Net Cash flow from financing activities Net Increase in Cash Cash at the beginning of period Cash at the end of period 498) 111