Question

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for National Intercable Company. Additional information from NIC’s accounting records is provided also.

NATIONAL INTERCABLE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions)
	2018				2017
Assets
Cash	$	139			$	130
Accounts receivable		388				380
Less: Allowance for uncollectible accounts		(10	)			(8	)
Prepaid insurance		5				12
Inventory		364				360
Long-term investment		66				110
Land		250				250
Buildings and equipment		374				350
Less: Accumulated depreciation		(146	)			(120	)
Trademark		27				30
	$	1,457			$	1,494

Liabilities
Accounts payable	$	50			$	68
Salaries payable		3				6
Deferred income tax liability		21				15
Lease liability		88				0
Bonds payable		140				320
Less: Discount on bonds		(29	)			(35	)
Shareholders' Equity
Common stock		370				350
Paid-in capital—excess of par		145				125
Preferred stock		50				0
Retained earnings		619				645
	$	1,457			$	1,494

NATIONAL INTERCABLE COMPANY Income Statement For Year Ended December 31, 2018 ($ in millions)
Revenues
Sales revenue	$	530
Investment revenue		16
Gain on sale of investments		6		$	552
Expenses
Cost of goods sold		240
Salaries expense		74
Depreciation expense		45
Trademark amortization expense		3
Bad debt expense		8
Insurance expense		38
Bond interest expense		50
Loss on building fire		52			510
Income before tax					42
Income tax expense					34
Net income				$	8

Additional information from the accounting records:

1. Investment revenue includes National Intercable Company's $4 million share of the net income of Central Fiber Optics Corporation, an equity method investee.
2. A long-term investment in bonds, originally purchased for $48 million, was sold for $54 million.
3. Pretax accounting income exceeded taxable income causing the deferred income tax liability to increase by $6 million.
4. A building that originally cost $76 million, and which was one-fourth depreciated, was destroyed by fire. Some undamaged parts were sold for $5 million.
5. The right to use a building was acquired with a seven-year lease agreement; present value of lease payments, $100 million. Annual lease payments of $12 million are paid at Jan. 1 of each year starting in 2018.
6. $180 million of bonds were retired at maturity.
7. $20 million par value of common stock was sold for $40 million, and $50 million of preferred stock was sold at par.
8. Shareholders were paid cash dividends of $34 million.

Required:
2. Prepare the statement of cash flows. Present cash flows from operating activities by the direct method. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

The answer has been presented in the supporting sheets. All the parts has been solved with detailed explanation and formulas and format. For detailed answers refer to the supporting sheets.