Question

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2016 ($ in millions) Sales $ 700 Cost of goods sold (245 ) Gross margin 455 Salaries expense $ 100 Depreciation expense 78 Patent amortization expense 5 Interest expense 18 Loss on sale of land 4 (205 ) Income before taxes 250 Income tax expense (125 ) Net Income $ 125 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) Year 2016 2015 Change Cash $ 117 $ 110 $ 7 Accounts receivable 230 247 (17 ) Inventory 445 460 (15 ) Accounts payable 165 154 11 Salaries payable 85 96 (11 ) Interest payable 40 30 10 Income taxes payable 30 20 10 Required: Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct 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

Required Cash Flow Statement is as under:

Notes:

1. Cash Receipts from Customers = Net Sales + Beginning Accounts Receivable - Ending Accounts Receivable

2. Cash Payments to Suppliers = COGS + Ending Inventory - Beginning Inventory + Beginning Accounts Payable - Ending Accounts Payable

3. Caid paid for expenses/interest/income tax = Beginning Expense Payable + Expense during the year - Ending Expense Payable

4. Depreciation and Patent Amortisation are not considered in Cash Flow Statement as these are non cash expenses.

5. Loss on Sale of land is also not considered as it is an investing activity and not a part of operating activities.