In: Accounting
The comparative balance sheets for 2021 and 2020 and the income
statement for 2021 are given below for Arduous Company. Additional
information from Arduous’s accounting records is provided
also.
ARDUOUS COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) |
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2021 | 2020 | |||||||
Assets | ||||||||
Cash | $ | 109 | $ | 81 | ||||
Accounts receivable | 190 | 194 | ||||||
Investment revenue receivable | 6 | 4 | ||||||
Inventory | 205 | 200 | ||||||
Prepaid insurance | 4 | 8 | ||||||
Long-term investment | 156 | 125 | ||||||
Land | 196 | 150 | ||||||
Buildings and equipment | 412 | 400 | ||||||
Less: Accumulated depreciation | (97 | ) | (120 | ) | ||||
Patent | 30 | 32 | ||||||
$ | 1,211 | $ | 1,074 | |||||
Liabilities | ||||||||
Accounts payable | $ | 50 | $ | 65 | ||||
Salaries payable | 6 | 11 | ||||||
Interest payable (bonds) | 8 | 4 | ||||||
Income tax payable | 12 | 14 | ||||||
Deferred tax liability | 11 | 8 | ||||||
Notes payable | 23 | 0 | ||||||
Lease liability | 75 | 0 | ||||||
Bonds payable | 215 | 275 | ||||||
Less: Discount on bonds | (22 | ) | (25 | ) | ||||
Shareholders’ Equity | ||||||||
Common stock | 430 | 410 | ||||||
Paid-in capital—excess of par | 95 | 85 | ||||||
Preferred stock | 75 | 0 | ||||||
Retained earnings | 242 | 227 | ||||||
Less: Treasury stock | (9 | ) | 0 | |||||
$ | 1,211 | $ | 1,074 | |||||
ARDUOUS COMPANY Income Statement For Year Ended December 31, 2021 ($ in millions) |
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Revenues and gain: | ||||||
Sales revenue | $ | 410 | ||||
Investment revenue | 11 | |||||
Gain on sale of Treasury bills | 2 | $ | 423 | |||
Expenses and loss: | ||||||
Cost of goods sold | 180 | |||||
Salaries expense | 73 | |||||
Depreciation expense | 12 | |||||
Amortization expense | 2 | |||||
Insurance expense | 7 | |||||
Interest expense | 28 | |||||
Loss on sale of equipment | 18 | |||||
Income tax expense | 36 | 356 | ||||
Net income | $ | 67 | ||||
Additional information from the accounting records:
ARDUOUS COMPANY | Workings: | |||||
Statement of Cash Flows | Calculation : | |||||
For Year Ended December 31, 2021 | Cash collected from customers | |||||
($ in millions) | Beginning AR | $194 | ||||
Cash flows from operating activities | + Sales | $410 | ||||
Cash Inflow: | - Ending AR | -$190 | ||||
From customers | 414 | $414 | ||||
From investment revenue | 3 | |||||
From sale of cash equivalents | 2 | Purchase from suppliers | ||||
- Beginning Inventory | -$200 | |||||
Cash Outflows: | + cost of goods sold | $180 | ||||
To suppliers of goods | (200) | + Ending Inventory | $205 | |||
To employee | (78) | $185 | ||||
For income taxes | (35) | |||||
For insurance | (3) | Cash paid for suppliers | ||||
For bond interest | (21) | Beginning AP | $65 | |||
+ purchase from suppliers | $185 | |||||
Net cash provided by operating activities | 82 | - Ending AP | -$50 | |||
Cash flows from investing activities | $200 | |||||
Purchase of land | (23) | |||||
Purchase of long-term investment | (25) | Cash paid for salaries expenses: | ||||
Sale of machine components | 17 | + Beginning salaries payable | $11 | |||
+ Salaries expenses | $73 | |||||
Net cash used by investing activities | (31) | - Ending expenses payable | -$6 | |||
Cash flows from financing activities | $78 | |||||
Purchase of treasury stock | (9) | |||||
Payment of dividends | (22) | Cash paid for Income expenses: | ||||
Retirement of bonds payable | (60) | + Beginning Income tax payable | $14 | |||
Sale of preferred stock | 75 | + Income tax expenses | $36 | |||
Payment of lease liability | (7) | - Ending Income tax payable | -$12 | |||
Net cash used by financing activities | (23) | + Beginning Deferred income tax payable | $8 | |||
Net increase in cash | 28 | - Ending Deferred income tax payable | -$11 | |||
Cash balance January 1 | 81 | $35 | ||||
Cash balance December 31 | 109 | |||||
Cash paid for Bond interest expenses: | ||||||
Noncash investing and financing activities: | + Beginning Bond interest payable | $4 | ||||
Land acquired by issuing note payable | 23 | + Bond interest expenses | $28 | |||
Right to use building acquired | 82 | - Ending Bond interest payable | -$8 | |||
- Beginning Discount on bonds | -$25 | |||||
+ Ending Discount on bonds | $22 | |||||
$21 | ||||||