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	$	68		$	139
Accounts receivable		930			849
Inventory		795			726
Total current assets		1,793			1,714
Property, plant, and equipment		1,795			1,745
Less accumulated depreciation		944			738
Net property,plant, and equipment		851			1,007
Total assets	$	2,644		$	2,721
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	318		$	189
Accrued liabilities		209			141
Income taxes payable		135			101
Total current liabilities		662			431
Bonds payable		560			890
Total liabilities		1,222			1,321
Stockholders' equity:
Common stock		290			290
Retained earnings		1,132			1,110
Total stockholders' equity		1,422			1,400
Total liabilities and stockholders' equity	$	2,644		$	2,721

Burgess Company Income Statement (dollars in millions)
Sales	$	4,570
Cost of goods sold		3,120
Gross margin		1,450
Selling and administrative expenses		938
Net operating income		512
Nonoperating items:
Gain on sale of equipment		2
Income before taxes		514
Income taxes		170
Net income	$	344

Burgess also provided the following information:

The company sold equipment that had an original cost of $70 million and accumulated depreciation of $36 million. The cash proceeds from the sale were $36 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.)

Answer 1

	Statement of Cash Flows
	For the Year Ended December 31
Cash Flows from Operating Activities:
Net income		344
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation expense	242
Gain on Sale of Equipment	-2
Increase in Accounts receivable	-81
Increase in inventory	-69
Increase in accounts payable	129
Increase in accrued liabilities	68
Increase in Income taxes payable	34
		321
Net cash provided by operating activities		665
Cash Flows from Investing Activities:
Purchase of Property, plant, and equipment	-120
Sale of Property, plant, and equipment	36
Net Cash used by Investing Activities		-84
Cash Flows from Financing Activities
Payment of Cash Dividends	-322
Redemption of Bonds Payable	-330
Net Cash Used by Financing Activities		-652
Net Increase in Cash		-71
Cash at Beginning of Period		139
Cash at End of Period		68