Question

The chief accountant for Grandview Corporation provides you with the company’s 2018 statement of cash flows and income statement. The accountant has asked for your help with some missing figures in the company’s comparative balance sheets. These financial statements are shown next ($ in millions).

GRANDVIEW CORPORATION Statement of Cash Flows For the Year Ended December 31, 2018
Cash Flows from Operating Activities:
Collections from customers	$	112
Payment to suppliers		(39	)
Payment of general & administrative expenses		(28	)
Payment of income taxes		(19	)
Net cash flows from operating activities					$	26
Cash Flows from Investing Activities:
Sale of investments						75
Cash Flows from Financing Activities:
Issuance of common stock		15
Payment of dividends		(8	)
Net cash flows from financing activities						7
Net increase in cash					$	108

GRANDVIEW CORPORATION Income Statement For the Year Ended December 31, 2018
Sales revenue				$	120
Cost of goods sold					42
Gross profit					78
Operating expenses:
General and administrative	$	28
Depreciation		20
Total operating expenses					48
Operating income					30
Other income:
Gain on sale of investments					20
Income before income taxes					50
Income tax expense					8
Net income				$	42

GRANDVIEW CORPORATION Balance Sheets At December 31
	2018				2017
Assets:
Cash	$	175			$	?
Accounts receivable		?				94
Investments		—				55
Inventory		70				?
Property, plant & equipment		160				160
Less: Accumulated depreciation		(85	)			?
Total assets		?				?
Liabilities and Shareholders’ Equity:
Accounts payable to suppliers	$	52			$	40
Payables for selling & admin. expenses		19				19
Income taxes payable		32				?
Common stock		255				240
Retained earnings		?				30
Total liabilities and shareholders’ equity		?				?

Required:
1. Calculate the missing amounts.
2. Prepare the operating activities section of Grandview’s 2018 statement of cash flows using the indirect method.
  

Answer 1

	2018	2017
Assets
Cash	175	67	(175-108)
Account Receivable	102	94					Account Receivable
Investments	0	55			To balance b/d	94	By Bank	112
Inventory	70	61			To Sales	120	To Balnce C/d	102
Property Plant	160	160				214		214
Less: Accumulated dep	-85	-65	(85-20)
Net Assets	75	95
Total Assets	422	371					Account Payable
					To Bank	39	By Balance b/d	40
Liabilities and Equity							By Purchases	51	Note 1
Account Payable	52	40			To Balance c/d	52
Payable	19	19				91		91
Inome Taxes	32	42
Common stock	255	240				Calculation of Opening Inventory
Retained Earnings	64	30				Opening Inventory		61	(Balancing Figure)
Note 2	422	371				Purchases		51	Note 1
						Closing Stock		-70
2) Cash Flow from Operations						COGS		42
Net Income	42
Add: Non Cash expense
Deprectiation	20						Income Taxes Payable
Less: NonOperating Income					To Bank	19	By Balance Bd	42
Gain on Sale of Assets	-20
Net Income before							By Income tax	9
Working Capital changes	42				To Balance cd	32
Add: Increase in Current Liabilities						51		51
and Decrease in Current Assets
Account Payable	12
							Retained Earnings	Note 2
Less: Decrease in Current Liabilities						Opening Balance	30
and Increase in Current Assets						Add: Profit	42
Account Receivable	-8					Less: Dividend	-8
Inventory	-9					Closing Balance	64
Income Taxes	-10
Cash before tax	27
Taxes Paid	-9
Cash from Operations	18