In preparation for developing its statement of cash flows for the year ended December 31, 2016, Millennium Solutions,Inc., collected the following information ($ in millions): Payment for the early extinguishments oflong-term notes (book value: $50 million) $.................54Sale of common shares...............176Retirement of common share...............122Loss on sale of equipment ................. 2Proceeds from sale of equipment ................... 8Issuance of short-term note payable for cash................. 10Acquisition of building for cash............... 7Purchase of marketable securities (not a cash equivalent).............. 5Purchase of marketable securities (considered a cash equivalent)............1Cash payment for 3-year insurance policy.............3Collection of note receivable with interest (principal amount, $11)..............13Declaration of cash dividends............. 33Distribution of cash dividends declared in 2015 ................. 30Required:1. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from investing activitiesfor 2016?2. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from financing activitiesfor 2016?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
In preparation for developing its statement of
Inc., collected the following information ($ in millions): Payment for the early extinguishments of
long-term notes (book value: $50 million) $.................54
Sale of common shares...............176
Retirement of common share...............122
Loss on sale of equipment ................. 2
Proceeds from sale of equipment ................... 8
Issuance of short-term note payable for cash................. 10
Acquisition of building for cash............... 7
Purchase of marketable securities (not a cash equivalent).............. 5
Purchase of marketable securities (considered a cash equivalent)............1
Cash payment for 3-year insurance policy.............3
Collection of note receivable with interest (principal amount, $11)..............13
Declaration of cash dividends............. 33
Distribution of cash dividends declared in 2015 ................. 30
Required:
1. In Millennium’s statement of cash flows, what were net
for 2016?
2. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from financing activities
for 2016?
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