Question

Consider the following comparative balance sheets for the Midland Manufacturing Corporation.

Midland Manufacturing Corporation
Comparative Balance Sheets (in Millions of Dollars)*
	December 31,		December 31,
	Year 1		Year 2
Assets
Current assets:
Cash	$ 4.4		$ 0.6
Accounts receivable, net	7.4		7.6
Inventories	14.5		14.7
Total current assets	$26.3		$22.9
Property and equipment	$80.6		$114.8
Less: Accumulated depreciation	16.4		25.5
Net property and equipment	$64.2		$89.3
Total assets	$90.5		$112.2
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable	$ 8.1		$ 9.3
Other current liabilities	5.7		8.5
Total current liabilities	$13.8		$17.8
Long-term debt	18.1		31.1
Deferred federal income taxes	$1.0		$1.6
Stockholders’ equity:
Common stock	$ 3.3		$ 3.3
Additional paid-in capital	27.9		27.9
Retained earnings	26.4		30.5
Total stockholders’ equity	$57.6		$61.7
Total liabilities and stockholders’ equity	$90.5		$112.2
*Net income for the year ended December 31, Year 2, totaled $7.8 million; dividends paid during the same period totaled $3.7 million; $1.7 million of long-term debt was retired in Year 2; and fixed assets were sold during Year 2 for $0.7 million.

Prepare a statement of cash flows (using the indirect method) for the Midland Manufacturing Corporation for the year ending December Year 2, based on the comparative balance sheets shown above. Use minus sign to indicate cash outflows. Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

Midland Manufacturing Corporation
Statement of Cash Flows For the Year Ended December 31, Year 2
($ millions)
Cash Flows from Operating Activities:
Net Income	$
Adjustments to reconcile net income to net cash provided
from operating activities
Depreciation
(Increase) decrease in current assets or liabilities
Accounts receivable
Inventories
Accounts payable
Other current liabilities
Increase (decrease) in deferred taxes
Total adjustments
Net cash provided from (used by) operating activities
Cash Flows from Investing Activities
Proceeds from sale of facilities or equipment
Capital expenditures
Net cash used by investing activities
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt
Repayments of long-term debt
Dividends paid
Net cash provided from (used by) financing activities
Net Increase (Decrease) in Cash
Cash - Beginning of Year
Cash - End of Year	$

Answer 1

Midland Manufacturing Corporation
Statement of Cash Flows For the Year Ended December 31, Year 2
($ millions)
Cash Flows from Operating Activities:
Net Income		7.8
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation	9.1
(Increase) decrease in current assets or liabilities
Accounts receivable	(0.2)
Inventories	(0.2)
Accounts payable	1.2
Other current liabilities	4.0
Increase (decrease) in deferred taxes	(0.6)
Total adjustments		13.3
Net cash provided from (used by) operating activities		21.1
Cash Flows from Investing Activities
Proceeds from sale of facilities or equipment	0.7
Capital expenditures	(34.9)
Net cash used by investing activities		(34.2)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt	14.7
Repayments of long-term debt	(1.7)
Dividends paid	(3.7)
Net cash provided from (used by) financing activities		9.3
Net Increase (Decrease) in Cash		(3.8)
Cash - Beginning of Year
Cash - End of Year

To find capital expenditure = opening of Plant - Sales of plant - closing of plant (excluding depre)