Question

ARDUOUS COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions)
	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)
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:

1. Investment revenue includes Arduous Company’s $6 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. Equipment originally costing $70 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $17 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $3 million.
5. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.
6. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
7. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $82 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2021.
8. $60 million of bonds were retired at maturity.
9. In February, Arduous issued a 5% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Required:
Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1