Question

The chief accountant for Grandview Corporation provides you with the company’s 2021 statement of cash flows and income statement. The accountant has asked for your help with some missing figures in the company’s comparative balance sheets. These financial statements are shown next ($ in millions).

GRANDVIEW CORPORATION Statement of Cash Flows For the Year Ended December 31, 2021
Cash Flows from Operating Activities:
Collections from customers	$	133
Payment to suppliers		(45	)
Payment of general & administrative expenses		(36	)
Payment of income taxes		(27	)
Net cash flows from operating activities					$	25
Cash Flows from Investing Activities:
Sale of investments						83
Cash Flows from Financing Activities:
Issuance of common stock		17
Payment of dividends		(8	)
Net cash flows from financing activities						9
Net increase in cash					$	117

GRANDVIEW CORPORATION Income Statement For the Year Ended December 31, 2021
Sales revenue				$	152
Cost of goods sold					50
Gross profit					102
Operating expenses:
General and administrative expense	$	36
Depreciation expense		28
Total operating expenses					64
Operating income					38
Other income:
Gain on sale of investments					12
Income before income taxes					50
Income tax expense					16
Net income				$	34

Required:
1. Calculate the missing amounts.
2. Prepare the operating activities section of Grandview’s 2021 statement of cash flows using the indirect method.

Calculate the missing amounts. (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).)

GRANDVIEW CORPORATION Balance Sheets At December 31 2021 2020 Assets: Cash 198 Accounts receivable 102 Investments 71 Inventory 78 Property, plant & equipment 168 168 Less: Accumulated depreciation (101) Total assets Liabilities and Shareholders’ Equity: Accounts payable 64 48 Accrued liabilities (for selling & admin. expense) 27 27 Income taxes payable 40 Common stock 265 248 Retained earnings 42 Total liabilities and shareholders’ equity

Prepare the operating activities section of Grandview’s 2021 statement of cash flows 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).)

	GRANDVIEW CORPORATION Statement of Cash Flows For the Year Ended December 31, 2021 ($ in millions) Cash flows from operating activities: Adjustments for noncash effects: Changes in operating assets and liabilities: Net cash flows from operating activities

Answer 1

Please go through remarks column for method applied for calculating missing figures in comparative Balance Sheet for the years 2020 and 2021.

Coloured cell represents blank cell which are to filled.

GRANDVIEW CORPORATION
Balance Sheets
At December 31
	2021	2020	Remarks
Assets:
Cash	198	81	Used Net Increased Cash Amount during 2021 i.e.$ 117 as mentioned in Direct Cash Flow Statement. (198-117=81)
Accounts receivable	121	102	Take 2020 Figure ($102) then add sales during the year ($152) results in total receivable during the 2021 and less amount received during the year ($133),i.e. 102+152-133=121
Investments	0	71	Mentioned in Direct Cash Flow Statement, Investment sold for $83 and gain from sale mentioned in Income statement which is $12 so cost of investment was 83-12=71 (which resulted in net investment on Dec 31,2021 is zero, 71-71=0)
Inventory	78	67	Used 2021 figure of $78, less purchased of $45 during 2021 then add cost of goods sold of $50 and then less difference of accounts payable 16 (=64-48) ($16 represents material purchased during 2021) (Think it like this, 67+16+45-50=78)
Property, plant & equipment	168	168
Less: Accumulated depreciation	-101	-73	Used depreciation of $28 as mentioned in income statement of 2021, less it from 101 to arrive at 2020 accumulated depreciation figure.
Total assets	464	416
Liabilities and Shareholders’ Equity:
Accounts payable	64	48
Accrued liabilities (for selling & admin. expense)	27	27
Income taxes payable	40	51	To Do Reverse Calculation as follows- Used 2021 figure of 40, less income tax payable of 16 as mentioned in income statement of 2021 then add income tax paid 27 during 2021. (Think it like this, 51+16-27=40)
Common stock	265	248
Retained earnings	68	42	Take 2020 figure 42, add net income of 34 as per income statement of 2021 then deduct dividend paid of 8 paid in 2021.(42+34-8=68)
Total liabilities and shareholders’ equity	464	416

CASH FLOW FROM OPERATING ACTIVITIES USING INDIRECT METHOD
Particulars	Sub-Amount	Total Amount
Net Profit Before Tax		50.00
Adjustments for non cash effects:
Depreciation	28.00
(Profit)/loss on sale of Assets (mentioned in Income statement, gain from sale of investment)	(12.00)	16.00
Operating Profit before Working Capital Changes		66.00
Adjustments for changes in operating assets and liabilities::
Decrease/(Increase) in Accounts Receivables (121-102=19)	(19.00)
Decrease/(Increase) in Inventories (78-67=11)	(11.00)
Increase/(Decrease) in Payables (64-48=16)	16.00	(14.00)
Cash generated from operations		52.00
Income Tax paid		(27.00)
Net Cash flow from Operating activities		25.00