Home / Questions / PROBLEM 14 11 Prepare a Statement of Cash Flows LO1 LO2 A comparative balance sheet and an...
PROBLEM 14–11 Prepare a Statement of Cash Flows [LO1, LO2]
A comparative balance sheet and an income statement for Blankley Company are given below:
|
Cash and cash equivalents . . . . . . . . . . |
$ 39 |
|
$ 81 |
|
Accounts receivable . . . . . . . . . . . . . . . . |
640 |
|
588 |
|
Inventory . . . . . . . . . . . . . . . . . . . . . . . . |
650 |
|
610 |
|
Total current assets . . . . . . . . . . . . . . . . . . |
1,329 |
|
1,279 |
|
Property, plant, and equipment . . . . . . . . . |
1,505 |
|
1,484 |
|
Less accumulated depreciation . . . . . . . |
770 |
|
651 |
|
Net property, plant, and equipment . . . . . . |
735 |
|
833 |
|
Total assets . . . . . . . . . . . . . . . . . . . . . . . . |
$2,064 |
|
$2,112 |
|
Accounts payable . . . . . . . . . . . . . . . . . . |
$ 260 |
|
$ 160 |
|
Accrued liabilities . . . . . . . . . . . . . . . . . . |
180 |
|
170 |
|
Income taxes payable . . . . . . . . . . . . . . . |
77 |
|
72 |
|
Total current liabilities . . . . . . . . . . . . . . . . |
517 |
|
402 |
|
Bonds payable . . . . . . . . . . . . . . . . . . . . . . |
415 |
|
600 |
|
Total liabilities . . . . . . . . . . . . . . . . . . . . . . |
932 |
|
1,002 |
|
Stockholders’ equity: Common stock . . . . . . . . . . . . . . . . . . . . |
145 |
|
145 |
|
Retained earnings . . . . . . . . . . . . . . . . . |
987 |
|
965 |
|
Total stockholders’ equity . . . . . . . . . . . . . . |
1,132 |
|
1,110 |
|
Total liabilities and stockholders’ equity . . . |
$2,064 |
|
$2,112 |
|
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$3,700 |
|
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . |
2,540 |
|
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
1,160 |
|
Selling and administrative expenses . . . . . . . . . . . . . |
880 |
|
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . |
280 |
|
Nonoperating items: Gain on sale of equipment . . . . |
2 |
|
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . |
282 |
|
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
112 |
|
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ 170 |
Blankley also provided the following information:
1. The company sold equipment that had an original cost of $12 million and accumulated depre- ciation of $7 million. The cash proceeds from the sale were $7 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.
Required:
1. Using the indirect method, prepare a statement of cash flows for the year.
2. Assume that Blankley had sales of $3,900, net income of $190, and net cash provided by operating activities of $160 in the prior year (all numbers are stated in millions). Prepare a memo that summarizes your interpretations of Blankley’s financial performance.
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