Arduous company statement cash flows

P 21–11 - Arduous Company - Prepare a statement of cash flows; direct method ● LO3 LO8

The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

a. During 2011, $6 million of customer accounts were written off as uncollectible.

b. Investment revenue includes Arduous Company’s $6 million share of the net income of Demur Company, an equity method investee.

c. Treasury bills were sold during 2011 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

d. A machine originally costing $70 million that was one-half depreciated was rendered unusable by a rare flood. Most major components of the machine were unharmed and were sold for $17 million.

e. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.

f. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.

g. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.

h. A building was acquired by a 15-year capital lease; present value of lease payments, $82 million.

i. $60 million of bonds were retired at maturity.

j. In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.

k. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Required:

Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2011. Present cash flows from operating activities by the direct method. (A reconciliation schedule is not required.)

Problem 21-11

Arduous Company

Statement of Cash Flows

For year ended December 31, 2011 ($ in millions)

Cash flows from operating activities:

Cash inflows:

From customers $

From investment revenue

From sale of cash equivalents

Cash outflows:

To suppliers of goods

To employees

For insurance

For bond interest

For income taxes

Net cash flows from operating activities $ 82

Cash flows from investing activities:

Sale of machine components

Purchase of long-term investment

Purchase of land

Net cash flows from investing activities (31)

Cash flows from financing activities:

Retirement of bonds payable

Sale of preferred stock

Payment of cash dividends

Purchase of treasury stock

Net cash flows from financing activities (16)

Net increase in cash 35

Cash balance, January 1 81

Cash balance, December 31 $116

Noncash investing and financing activities:

Any disclosures here? Please identify.