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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 $ 43 680 670 1,393 1,545 794 $ 89 624 626 1,339 1,520 663 857 $ 2, 196 751 $2,144 Assets Current assets: Cash and cash equivalents Accounts receivable Inventory Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total Habilities Stockholders' equity: Common stock Retained earnings Total stockholders equity Total liabilities and stockholders' equity 268$ 164 184 166 B5 76 532 406 435 640 972 1,046 165 1007 1.172 $2,144 165 985 1. 150 $ 2.196 Burgess Company Income Statement (dollars in millions) Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating Items Gain on sale of equipment Income before taxes Income taxe Bet income $3.820 2,620 1,200 880 312 2 314 120 194 Burgess also provided the following information: 1. The company sold equipment that had an original cost of $20 million and accumulated depreciation of $11 million. The cash proceeds from the sale were $11 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 transact the year

Answer 1

BURGESS COMPANY

CASH FLOW STATEMENT

	Amount In millions ($)	Amount In millions ($)
Operating activities:
Net income	194
Adjustment to convert net income to a cash basis:
Depreciation ($794 millions - 663 millions= 131 millions)	131
Gain on sale of equipment	-2
Increase in account receivable	-56
Increase in inventory	-44
Increase in account payable	104
Increase in accrued liabilities	18
Increase in income tax payable	9
Net cash provided by operating activities		354
Investing activities:
Addition to Property Plant and Equipment*	-34
Sale of Property Plant and Equipment	11
Net cash used in investing activities		-23
Financing activities:
Issuance of bond Payable	0
Cash dividend paid	-172
Retirement of bonds Payable	-205
Net cash used in financing activities		-377
Net decrease in cash		-46
Beginning cash and cash equivalents		89
Ending cash and cash equivalents		43

* Working note:

* Equipment purchase:

	Amount in million
Beginning balance	$1,520
Less: Sale (20 millions-11 millions= 9 millions) Note: Depreciation expense on the Equipment of value $20 millions has already charged in operating activities	-9
	1,511
Closing balance	1,545
Purchase equipment (1545 millions - 1511 millions = 34 millions)	34

* Dividend paid

	Amount in millions
Retained earning, beginning	$985
Net income	194
	$1179
Retained earning, ending	-1007
Dividend paid	172