Question

In: Accounting

Portions of the financial statements for Hawkeye Company are provided below.

Portions of the financial statements for Hawkeye Company are provided below.

HAWKEYE COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in millions)
Sales       $ 840    
Cost of goods sold         320    
Gross margin         520    
Operating expenses:              
Salaries $ 226          
Depreciation   184          
Loss on sale of land   10          
Total operating expenses         420    
Operating income         100    
Other income (expense):              
Gain on sale of cash equivalents         4    
Interest expense         (34 )  
Income before tax         70    
Income tax expense         35    
Net income       $ 35    
 
HAWKEYE COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in millions)
  Year  
  2021 2020 Change
Cash $ 244   $ 216   $ 28  
Accounts receivable   389     409     (20 )
Inventory   892     866     26  
Accounts payable   226     266     (40 )
Salaries payable   186     200     (14 )
Interest payable   67     56     11  
Income tax payable   96     116     (20 )
 

Problem 21-9 (Algo) Part 1

Required:
1.
Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using 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.)

Cash flows from operating activities:

NET CASH FLOWS FROM OPERATING ACTIVITIES

Required:
2.
Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the indirect 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.)

Solutions

Expert Solution

Answer: (in $ millions)
HAWKEYE COMPANY
Cash Flow Statement (Direct Method)
Cash flows form operating activities:
Cash received from customers
( $ 840 + $ 20)
$ 860
Cash paidto Suppliers
($ 320 (+) $ 26 +$ 40)
($ 386)
Cash paid to employees
($ 226 (+) $ 14)
($240)
Cash paid for Income tax
( $ 35 + $ 20 )
($ 55 )
Cash paid for Interest
( $ 34 (-) $ 11)
( $ 23)
Gain on sale of cash equipvalents $ 4
Net Cash Flows From Operating Activities $ 160
HAWKEYE COMPANY
Cash Flow Statement (Indirect Method)
Cash flows from operating activities
Net Income $ 35
Adjustments to reconcile net income:
Depreciation expense $ 184
Loss on sale of land $ 10
Gain on sale of cash equivalents ( $ 4)
Decrease in Accounts Receiveble $ 20
Increase in Inventory ( $ 26)
Decrease in Accounts Payable ( $ 40)
Decrease in Salaries Payable ( $ 14)
Increase in Interest Payable $ 11
Decrease in Income tax Payable ( $ 20)
$ 121
Net cash provided by operating activities $ 156

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