Question

Amerbrand Company (A)

Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services. Financial statements for the company for 2004 are shown in Exhibit 1. These statements reflect the following transactions (dollar amounts in thousands):

1. Depreciation and amortization expense was $115,974.

2. Net income included a loss of $66,046 resulting from the write-off of some obsolete equipment. The equip- ment had not yet been disposed of.

3. Net income included $59,610 from Amerbrand's investment in a subsidiary; none of this income had been re- ceived in cash.

4. The year-end balance in Deferred Income Taxes was $17,548 lower than it was at the start of the year.

5. New property, plant, and equipment purchases totaled $260,075, all paid for with cash. Disposals of fixed as- sets generated $33,162 cash proceeds.

6. Acquisition of another company that was made for cash resulted in additional depreciable assets of $31,691 and goodwill of $102,030.

7. Cash dividends were paid in the amount of $216,158.

8. The firm declared and issued a 100 percent common stock dividend effective September 10, 2004; that is, each shareholder received as a dividend a number of shares equal to his or her holdings prior to the dividend. The newly issues shares were valued at par in recording this transaction.

9. The firm spent $30,609 to purchase treasury stock on the open market. Some of the shares so acquired were issued to certain employees as a bonus.

10. The firm increased its short-term debt as indicated on the balance sheet in Exhibit 1. Long-term borrowing de- creased by $34,606.

Assignment

1 Prepare a statement of cash flows for the year 2004. In order for your statement to show the correct increase in cash ($4,960), you will need to add a "miscellaneous activities" category; this will capture several transactions that were not described because they are somewhat complicated.

Answer 1

Amerbran Company
Statement of cash flow
Net cash flow from Operating activities	Amount($)
Net Profit	328,773
Adjustments:
Depreciation and amortization	115,974
Deffered taxes	(17,548)
Increase in Accounts receivable	(68,827)
Increase in inventories	(19,510)
Increase in accounts payable	33,075
Increase in accrued expenses payable	194,728
Decrease in prepaid expenses	1,027
Write off obsolete equipment	66,046
Income from subsidiary	(59,610)
Cash flow from operating activities	574,128
Net cash flow from Investing activities
Acquisition of company	(133,721)
Purchase of property, plant and equipment	(260,075)
Proceeds from disposal	33,162
Net cash used by investing activities	(360,634)
Net cash flow from Financing activities
Procceds from short term debt	79,664
Payment on long term debt	(34,606)
Dividends paid	(216,158)
Purchase of treasury stock	(30,609)
Net cash used by Financing activities	(201,709)
Cash flow from miscellaneous activity	(6,825)
Net increase in cash	4,960
Cash at beginning of the year	23,952
Cash at the end of the year	28,912