Below are the comparative income statements and balance sheets for Arduous Compa

Question

Below are the comparative income statements and balance sheets for Arduous Company for the years ending on December 31, 2012 and December 31, 2013. Prepare a statement of cash flows using the INDIRECT method in good form.

Investment revenue includes the company’s $6 million share of net income in a company that is accounted for with the equity method.

A machine originally costing $70 million that was half way depreciated was rendered unusable by a flood. The machine parts were sold for $17 million

Treasury bills were sold at a gain of $2 million. They were classified as cash equivalents.

Temporary differences in taxes caused deferred income tax to increase by $3 million.’

The preferred stock of a company was purchased for $25 million as a long term investment.

Land that cost $46 million was acquired for cash and a $23 million note (15% for 4 years).

A capital lease was initiated with pv of lease payments of $82 million for the building.

A 4% stock dividend (4 million shares) was given when the market price of the $5 par stock was $7.50

$60 million in bonds were retired.

Prepare the statement of cash flows for Arduous Company using the indirect method. (Do not round your intermediate calculations. 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.)

Show your work.

Below are the comparative income statements and balance sheets for Arduous Company for the years ending on December 31, 2012 and December 31, 2013. Prepare a statement of cash flows using the INDIRECT method in good form.

Explanation / Answer

Arduous Company   Cash flow Statement for the period ending Dec 31.2013. Indirect Method Details Amt $ Cash Flow From Operating Activities Net Income 67 Add Depreciation & Amortization 14 Less : Capital Gain 0 Less Investment Gain -8 Add : Capital Loss 18 Add: investment Loss 0 Decreased Accounts Receivable 4 Increased Inventory -5 Decreased Prepaid Expenses 4 Decreased Accounts Payable -15 Decreased Salaries Payable -5 Decreased Income Tax Payable -2 Increased Deferred Income Tax Liability 3 Increased Bond Interest Payable 4 Increased Accrued Investment revenue receivable -2 Total Cash Flow From Operating Activities 77 Cash Flow From Investing Activities Cash Inflow from sales of assets 17 Cash outflow from purchase of assets-Land -23 Cash Inflow from sales of investments 11 Cash outflow from purchase of Investments -31 Total Cash Flow From Investing Activities -26 Cash Flow From Financing Activities Cash received from issue of Common stock 30 Cash Paid for Bond retirement -60 Cash From Preferred stock issue 75 Cash Received from Note issue 0 Cash Paid for Dividend Payment -52 Cash paid for stock repurchase -9 TotalCash Flow From Financing Activities -16 Total Cash Flow from Operating. Investing and Financing Activities 35 Intial Cash Balance 81 Net Effect of Cash Flow during the period 35 Closing Cash Balance 116

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