Question

Use the balance sheet and income statement below : CLANCY’S DOG BISCUIT CORPORATION Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) Assets 2015 2014 Liabilities and Equity 2015 2014 Current assets: Current liabilities: Cash and marketable securities $ 7 $ 7 Accrued wages and taxes $ 10 $ 9 Accounts receivable 25 20 Accounts payable 18 17 Inventory 32 25 Notes payable 16 15 Total $ 64 $ 52 Total $ 44 $ 41 Fixed assets: Long-term debt: $ 30 $ 26 Gross plant and equipment $ 88 $ 70 Stockholders’ equity: Less: Depreciation 18 15 Preferred stock (2 million shares) $ 2 $ 2 Common stock and paid-in surplus Net plant and equipment $ 70 $ 55 (5 million shares) 11 11 Other long-term assets 18 18 Retained earnings 65 45 Total $ 88 $ 73 Total $ 78 $ 58 Total assets $ 152 $ 125 Total liabilities and equity $ 152 $ 125 CLANCY’S DOG BISCUIT CORPORATION Income Statement for Years Ending December 31, 2015 and 2014 (in millions of dollars) 2015 2014 Net sales $ 88 $ 92 Less: Cost of goods sold 44 40 Gross profits $ 44 $ 52 Less: Other operating expenses 5 4 Earnings before interest, taxes depreciation, and amortization (EBITDA) $ 39 $ 48 Less: Depreciation 3 3 Earnings before interest and taxes (EBIT) $ 36 $ 45 Less: Interest 4 4 Earnings before taxes (EBT) $ 32 $ 41 Less: Taxes 8 11 Net income $ 24 $ 30 Less: Preferred stock dividends $ 1 $ 1 Net income available to common stockholders $ 23 $ 29 Less: Common stock dividends 3 3 Addition to retained earnings $ 20 $ 26 Per (common) share data: Earnings per share (EPS) $ 4.60 $ 5.80 Dividends per share (DPS) $ 0.60 $ 0.60 Book value per share (BVPS) $ 15.20 $ 11.20 Market value (price) per share (MVPS) $ 15.85 $ 14.60 Prepare a statement of cash flows for Clancy’s Dog Biscuit Corporation. (Enter your answers in millions of dollars. Amounts to be deducted should be indicated with a minus sign. Leave no cells blank - be certain to enter "0" wherever required.)

Answer 1

Clancy's Dog Biscuit Corporation

Stataement of cash flows

For the year ended December 31, 2015

I. Cash flows from operating activities
Net income	24
Add: Provision for taxes	8
Interest	4
Depreciation	3
Operating profit before working capital changes	39
Add: Increase in current liabilities
Accounts payable	1
Notes payable	1
Less: Increase in current assets
Accounts receivable	-5
Inventory	-7
Less: tax paid	-7
Net cash flows from operating activities	22
II. Cash flows from Investing activities
Purchase of plant and equipment	-18
Other long term assets	0
Net cash used in investing activities	-18
III. Cash flows from Financing activities
Raising of long term debt	4
Preferred stock	0
Common stock	0
Interest paid	-4
Preferred stock dividend paid	-1
Common stock dividend paid	-3
Net cash used in financing activities	-4
Net increase in cash (I+II+III)	0
Add: Opening balance of cash and cash equivalents	7
Opening balance of cash and cash equivalents	7

Provision for tax Account

Cash(tax paid)	7*	Balancc b/d	9
Balance c/d	10	Provision for tax made	8
	17		17