Question

A comparative balance sheet and an income statement for Burgess Company are given below: Burgess Company Comparative Balance Sheet (dollars in millions) Ending Beginning Balance Balance Assets Current assets: Cash and cash equivalents $ 52 $ 107 Accounts receivable 770 705 Inventory 715 662 Total current assets 1,537 1,474 Property, plant, and equipment 1,635 1,601 Less accumulated depreciation 848 690 Net property, plant, and 787 911 equipment Total assets $2,324 $2,385 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 286 $ 173 Accrued liabilities 157 Income taxes payable 103 Total current liabilities 582 415 Bonds payable 480 730 Total liabilities 1,062 1,145 Stockholders' equity: Common stock 210 210 Retained earnings 1,052 1,030 Total stockholders' equity 1,262 1,240 Total liabilities and $2,324 $2,385 stockholders' equity 193 85 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 taxes Net income $4,090 2,800 1,290 906 384 386 138 248 $ Burgess also provided the following information: 1. The company sold equipment that had an original cost of $38 million and accumulated depreciation of $20 million. The cash proceeds from the sale were $20 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.

Answer 1

Anmt BURGESS COMPANY Statement of Cash Flows for the Year Ending 31st December,20xx Indirect Method 5 Particulars 5 Cash Flow From Operating Activities 7 Net Income After Tax 3 Add : Tax Expense - Net Income Before Tax ($ in Millions) 248 138 386 -1 Adjustments to reconcile Net Income :- -2 Add :Depreciation Expense (Working Note 3) 3 Less : Gain on sale of Equipment 142 (2) 526 5 Operating Profit before working capital changes -6 Changes in Working Capital :- -7 Increase in Inventory -8 Increase in Account Receivable 9 Increase in Account Payable 0 Total (53) (65) 113 521 -2 Less : Tax Paid (Working Note 1) 23 Net Cash Flow From Operating Activities(A) (120) 401

20 20 30 31 32 Cash Flow From Investing Activities 33 Sale of Equipments 34 Net Cash Flow From Investing Activities (B) 35 36 Cash Flow From Financing Activities 37 Cash Paid on Bonds Payable-Long Term 38 Cash Dividends Paid (Working Note 2) 39 Net Cash Flow From Financing Activities (C) 40 41 Net Cash Flows from All Activities (A+B+C) 42 Cash Balance at the beginning of the period 43 Cash Balance at the end of the period 44 45 46 17 (250) (226) (476) (55) 107 52

85 57 Working Note 1 58 Calculation of Income Tax Paid 59 Income Tax Payable (Beginning Balance) 60 Add : Provision for Income Tax 61 Total 62 Less Income Tax Payable (Ending Balance) 63 Income Tax Paid During the Year 138 223 (103) 120 64 65 66 Working Note 2 67 Calculation of Dividend Paid 68 69 Retained Earnings (Beginning Balance) 70 Add : Net Income 71 Total 72 Less : Retained Earnings (Ending Balance) 73 Dividend Paid During the Year 1,030 248 1,278 (1,052) 226 75 76 Working Note 3 77 Calculation of Depreciation for the current Year 78 79 Net Property Plant and Equipment (Beginning Balance) 80 Add : Sale of Equipment Cost $38 M - Acc. Dep $20 M] 81 Total 82 Less Net Property Plant and Equipment (Ending Balance) 83 Depreciation Chargerd During the Year 911 18 929 (787) 142