A comparative balance sheet and an income statement for Burgess Company are give

Question

A comparative balance sheet and an income statement for Burgess Company are given below:

Burgess also provided the following information:

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.

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.)

Burgess Company
Comparative Balance Sheet
(dollars in millions) Ending Balance Beginning 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 equipment 787    911      Total assets $ 2,324    $ 2,385      Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 286    $ 173         Accrued liabilities 193    157         Income taxes payable 103    85      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 stockholders' equity $ 2,324    $ 2,385   

Explanation / Answer

Cash Flow statement is prepared as under:

Working Notes:

Burgess Company Statement of Cash Flows As of Dec 31,20XX Particulars Amount ($) Amount ($) Net Income 248 Add: Depreciation 178 Less Gain on sale of equipment -2 Increase in Accounts Receivable -65 Increase in inventory 53 Increase in prepaid expense Increase in Accounts Payable 113 Increase in accrued liabilities 36 Increase in income tax payable 18 225 Net Cash flows from operating activities 473 Cash flows from investing activities:    Purchase of investments 72    Sale of Equipment 20 Net Cash used in investing activities 52 Cash flows from financing activities:     Bonds repaid -250     Common Stock issued     Dividend Paid 226 Net Cash flows used in financing activities 476 Net increase/decrease in cash 55 Opening Cash 107 Closing Cash 52

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