Question

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.)

Answer 1

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