The comparative balance sheets for 2021 and 2020 and the income statement for 2021 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also. ARDUOUS COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) 2021 2020 Assets Cash $ 142 $ 100 Accounts receivable 209 232 Investment revenue receivable 25 23 Inventory 226 219 Prepaid insurance 23 32 Long-term investment 213 144 Land 235 169 Buildings and equipment 437 438 Less: Accumulated depreciation (117 ) (158 ) Patent 53 56 $ 1,446 $ 1,255 Liabilities Accounts payable $ 69 $ 103 Salaries payable 25 37 Interest payable (bonds) 27 23 Income tax payable 31 38 Deferred tax liability 49 27 Notes payable 33 0 Lease liability 101 0 Bonds payable 234 313 Less: Discount on bonds (41 ) (46 ) Shareholders’ Equity Common stock 487 429 Paid-in capital—excess of par 133 104 Preferred stock 94 0 Retained earnings 232 227 Less: Treasury stock (28 ) 0 $ 1,446 $ 1,255 ARDUOUS COMPANY Income Statement For Year Ended December 31, 2021 ($ in millions) Revenues and gain: Sales revenue $ 589 Investment revenue 30 Gain on sale of treasury bills 2 $ 621 Expenses and loss: Cost of goods sold 199 Salaries expense 92 Depreciation expense 13 Amortization expense 3 Insurance expense 26 Interest expense 47 Loss on sale of equipment 34 Income tax expense 55 469 Net income $ 152 Additional information from the accounting records: Investment revenue includes Arduous Company’s $25 million share of the net income of Demur Company, an equity method investee. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents. Equipment originally costing $108 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $20 million. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $22 million. The preferred stock of Tory Corporation was purchased for $44 million as a long-term investment. Land costing $66 million was acquired by issuing $33 million cash and a 10%, four-year, $33 million note payable to the seller. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $107 million. Annual lease payments of $6 million are paid at the beginning of each year starting January 1, 2021. $79 million of bonds were retired at maturity. In February, Arduous issued a stock dividend (11.6 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $28 million. Required: Prepare the statement of cash flows for Arduous Company using the indirect 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).

The comparative balance sheets for 2021 and 2020 and the income statement for 2021 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also. ARDUOUS COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) 2021 2020 Assets Cash $ 142 $ 100 Accounts receivable 209 232 Investment revenue receivable 25 23 Inventory 226 219 Prepaid insurance 23 32 Long-term investment 213 144 Land 235 169 Buildings and equipment 437 438 Less: Accumulated depreciation (117 ) (158 ) Patent 53 56 $ 1,446 $ 1,255 Liabilities Accounts payable $ 69 $ 103 Salaries payable 25 37 Interest payable (bonds) 27 23 Income tax payable 31 38 Deferred tax liability 49 27 Notes payable 33 0 Lease liability 101 0 Bonds payable 234 313 Less: Discount on bonds (41 ) (46 ) Shareholders’ Equity Common stock 487 429 Paid-in capital—excess of par 133 104 Preferred stock 94 0 Retained earnings 232 227 Less: Treasury stock (28 ) 0 $ 1,446 $ 1,255 ARDUOUS COMPANY Income Statement For Year Ended December 31, 2021 ($ in millions) Revenues and gain: Sales revenue $ 589 Investment revenue 30 Gain on sale of treasury bills 2 $ 621 Expenses and loss: Cost of goods sold 199 Salaries expense 92 Depreciation expense 13 Amortization expense 3 Insurance expense 26 Interest expense 47 Loss on sale of equipment 34 Income tax expense 55 469 Net income $ 152 Additional information from the accounting records: Investment revenue includes Arduous Company’s $25 million share of the net income of Demur Company, an equity method investee. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents. Equipment originally costing $108 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $20 million. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $22 million. The preferred stock of Tory Corporation was purchased for $44 million as a long-term investment. Land costing $66 million was acquired by issuing $33 million cash and a 10%, four-year, $33 million note payable to the seller. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $107 million. Annual lease payments of $6 million are paid at the beginning of each year starting January 1, 2021. $79 million of bonds were retired at maturity. In February, Arduous issued a stock dividend (11.6 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $28 million. Required: Prepare the statement of cash flows for Arduous Company using the indirect 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).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The comparative balance sheets for 2021 and 2020 and the income statement for 2021 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

ARDUOUS COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions)
	2021	2020
Assets
Cash	$	142		$	100
Accounts receivable		209			232
Investment revenue receivable		25			23
Inventory		226			219
Prepaid insurance		23			32
Long-term investment		213			144
Land		235			169
Buildings and equipment		437			438
Less: Accumulated depreciation		(117	)		(158	)
Patent		53			56
	$	1,446		$	1,255
Liabilities
Accounts payable	$	69		$	103
Salaries payable		25			37
Interest payable (bonds)		27			23
Income tax payable		31			38
Deferred tax liability		49			27
Notes payable		33			0
Lease liability		101			0
Bonds payable		234			313
Less: Discount on bonds		(41	)		(46	)
Shareholders’ Equity
Common stock		487			429
Paid-in capital—excess of par		133			104
Preferred stock		94			0
Retained earnings		232			227
Less: Treasury stock		(28	)		0
	$	1,446		$	1,255

ARDUOUS COMPANY Income Statement For Year Ended December 31, 2021 ($ in millions)
Revenues and gain:
Sales revenue	$	589
Investment revenue		30
Gain on sale of treasury bills		2	$	621
Expenses and loss:
Cost of goods sold		199
Salaries expense		92
Depreciation expense		13
Amortization expense		3
Insurance expense		26
Interest expense		47
Loss on sale of equipment		34
Income tax expense		55		469
Net income			$	152

Additional information from the accounting records:

Investment revenue includes Arduous Company’s $25 million share of the net income of Demur Company, an equity method investee.
Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
Equipment originally costing $108 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $20 million.
Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $22 million.
The preferred stock of Tory Corporation was purchased for $44 million as a long-term investment.
Land costing $66 million was acquired by issuing $33 million cash and a 10%, four-year, $33 million note payable to the seller.
The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $107 million. Annual lease payments of $6 million are paid at the beginning of each year starting January 1, 2021.
$79 million of bonds were retired at maturity.
In February, Arduous issued a stock dividend (11.6 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $28 million.

Required:
Prepare the statement of cash flows for Arduous Company using the indirect 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).)

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