Question

Use the balance sheet and income statement below:

CLANCY’S DOG BISCUIT CORPORATION
Balance Sheet as of December 31, 2018 and 2017
(in millions of dollars)
Assets	2018				2017				Liabilities and Equity	2018				2017
Current assets:									Current liabilities:
Cash and marketable securities	$	8			$	8			Accrued wages and taxes	$	13			$	7
Accounts receivable		38				30			Accounts payable		27				25
Inventory		41				35			Notes payable		25				23
Total	$	87			$	73			Total	$	65			$	55
Fixed assets:									Long-term debt	$	48			$	43
Gross plant and equipment	$	111			$	90			Stockholders’ equity:
Less: Accumulated depreciation		31				25			Preferred stock (2 million shares)	$	2			$	2
Net plant and equipment	$	80			$	65			Common stock and paid-in-surplus (5 million shares)		11				11
Other long-term assets		28				28			Retained earnings		69				55
Total	$	108			$	93			Total	$	82			$	68
Total assets	$	195			$	166			Total liabilities and equity	$	195			$	166

CLANCY’S DOG BISCUIT CORPORATION
Income Statement for Years Ending December 31, 2018 and 2017
(in millions of dollars)
	2018				2017
Net sales	$	108			$	112
Less: Cost of goods sold		54				50
Gross profits	$	54			$	62
Less: Other operating expenses		8				7
Earnings before interest, taxes depreciation, and amortization (EBITDA)	$	46			$	55
Less: Accumulated depreciation		6				6
Earnings before interest and taxes (EBIT)	$	40			$	49
Less: Interest		6				6
Earnings before taxes (EBT)	$	34			$	43
Less: Taxes		16				19
Net income	$	18			$	24
Less: Preferred stock dividends	$	1			$	1
Net income available to common stockholders	$	17			$	23
Less: Common stock dividends		3				3
Addition to retained earnings	$	14			$	20
Per (common) share data:
Earnings per share (EPS)	$	3.40			$	4.60
Dividends per share (DPS)	$	0.60			$	0.60
Book value per share (BVPS)	$	16.00			$	13.20
Market value (price) per share (MVPS)	$	16.65			$	16.60

Prepare a statement of cash flows for Clancy’s Dog Biscuit Corporation. (Enter your answers in millions of dollars. Amounts to be deducted should be indicated with a minus sign.)

Answer 1

		CASH FLOW FROM OPERATING ACTIVITIES
	a	Net Income for 2012	$18
		Adjustment to reconcile net income
		to net cash provided by operating activities
	b	Depreciation expense	$6
		(Increase)/Decrease in current assets
	c	Increase in Accounts Receivable	-$8	(38-30)
	d	Increase in Inventory	-$6	(41-35)
		Increase/(Decrease) in current liabilities
	e	Increase in Accounts Payable	$2	(27-25)
	f	Increase in accrued wages and taxes	$6	(13-7)
	g=a+b+c+d+e+f	NET CASH PROVIDED BY OPERATING ACTIVITIES	$18
		CASH FLOW FROM INVESTING ACTIVITIES
		Investment in Plant and Equipment	-$21	(111-90)
		NET CASH USED IN INVESTING ACTIVITIES	-$21
		CASH FLOW FROM FINANCING ACTIVITIES
		Cash flow from Notes Payable	$2	(25-23)
		Cash flow from Long Term Debt	$5	(48-43)
		Payment of preference dividend	-$1
		Payment of common stock dividend	-$3
		NET CASH PROVIDED BY FINANCING ACTIVITIES	$3
		NET INCREASE/(DECREASE) IN CASH	$0	(18-21+3)