Question

A comparative balance sheet and an income statement for Burgess Company are given below:

Burgess Company Comparative Balance Sheet (dollars in millions)
	Ending Balance			Beginning Balance
Assets
Current assets:
Cash and cash equivalents	$	61		$	125
Accounts receivable		860			786
Inventory		760			698
Total current assets		1,681			1,609
Property, plant, and equipment		1,725			1,682
Less accumulated depreciation		902			717
Net property,plant, and equipment		823			965
Total assets	$	2,504		$	2,574
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	304		$	182
Accrued liabilities		202			148
Income taxes payable		121			94
Total current liabilities		627			424
Bonds payable		525			820
Total liabilities		1,152			1,244
Stockholders' equity:
Common stock		255			255
Retained earnings		1,097			1,075
Total stockholders' equity		1,352			1,330
Total liabilities and stockholders' equity	$	2,504		$	2,574

Burgess Company Income Statement (dollars in millions)
Sales	$	4,360
Cost of goods sold		2,980
Gross margin		1,380
Selling and administrative expenses		924
Net operating income		456
Nonoperating items:
Gain on sale of equipment		2
Income before taxes		458
Income taxes		156
Net income	$	302

Burgess also provided the following information:

The company sold equipment that had an original cost of $56 million and accumulated depreciation of $29 million. The cash proceeds from the sale were $29 million. The gain on the sale was $2 million.

The company did not issue any new bonds during the year.

The company paid a cash dividend during the year.

The company did not complete any common stock transactions during the year.

Required:

Using the indirect method, prepare a statement of cash flows for the year. (Enter your answers in millions not in dollars. List any deduction in cash and cash outflows as negative amounts.)

Burgess Company
Statement of Cash Flows
Operating activities:
Investing activities:
Financing activities:
Beginning cash and cash equivalents
Ending cash and cash equivalents

Answer 1

	Statement of cash flow
	cash from operating activities
	net income for the year					302
	Adjustments
	Depreciation expense		902 - (717-29)			214
	gain on sale					-2
	increase in accounts receivable					-74
	increase in inventory					-62
	incrrease in accounts payable					122
	increase in accrured liabilities					54
	increase in income taxes payable					27
	cash from operating activities						581
	Cash from investing activities
	Cash from sale of Equipment					29
	purchase of PPE		1725 - (1682-56)			-99
	Cash used by investing activities						-70
	Cash from financing activities
	Redemption of bonds					-295
	Cash dividend paid		1097 - (1075+302)			-280
	Cash used by financing activities					-575	-575
	net decrease in cash						-64
	Cash at the beginning of the year						125
	Cash at year end						61