Question

Eagle Companys financial statements for the year ended December 31, 2005 were as follows (in $
millions):

Income Statement
Sales                              150
Cost of Goods Sold          (48)
Wages Expense               (56)
Interest Expense             (12)
Depreciation                   (22)
Gain on Sale of Equipment 6
Income Tax Expense         (8)
Net Income                      10

Balance Sheet
                                             12-31-04   12-31-05
Cash                                            32           52
Accounts Receivable                      18           22
Inventory                                     46           44
Property. Plant & Equip (net)        182         160
Total Assets                                278          278
Accounts Payable                          28            33
Long-term Debt                           145          135
Common Stock                             70            70
Retained Earnings                         35            40
Total Liabilities & Equity               278          278

Cash flow from operations (CFO) for Eagle Company for the year ended December 31. 2005 was (in $
millions).

a. $41

b. $29

c. $37

Answer 1

Preaparing cash flow from Operating Activity:-

Particular	Amount in $
Net income	10
Adjustments:
Add: Depreciation	22
Less: Gain on sales of equipment	(6)
Change in working capital
Add: Increase in Accounts payable (33 -28)	5
Add: decrease in Inventory (44 -46)	2
Less: Increase in Accounts receiavbles(22-18)	(4)
Cash flow from Operating Activity	29

So, Cash flow from Operations is $29

Option B