Prepare statement of cash flows using the direct and indirect method.
UNITED BRANDS CORPORATION
Comparative Balance Sheet
December 31, 2016 and 2015
($ in millions)
Assets
2016
2015
Cash
$29
$20
Accounts Receivable
32
30
Short-term Investments
12
0
Inventory
46
50
Prepaid Insurance
3
6
Land
80
60
Building and Equipment
81
75
Less: Accumulated Depreciation
(16)
(20)
$267
$221
Liabilities
Accounts Payable
$26
$20
Salaries Payable
3
1
Income Tax Payable
6
8
Notes Payable
20
0
Bonds Payable
35
50
Less: Discount on bonds
(1)
(3)
Shareholder’s Equity
Common Stock
130
100
Paid-in Capital
29
20
Retained Earnings
19
25
$267
$221
Income Statement
Sales Revenue
$100
Cost of Goods Sold
60
Gross Profit
40
Operating Expenses:
Salaries Expense
13
Depreciation Expense
3
Bond Interest Expense
5
Insurance Expense
7
Total Operating Expenses
28
Other Income (Expenses)
Investment Revenue
3
Gain on Sale of Land
8
Loss on Sale of Equipment
(2)
Total other income (expenses)
9
Income before income taxes
21
Income tax expense
9
Net Income
12
Additional Information
1. Company land, purchased in a previous year for $10 million, was sold.
2. Equipment that originally cost $14 million and which was one-half depreciation, was sold.
3. The common shares of Mazuma C. were purchased for $12 million as a short-term investment.
4. Property was purchased for $30 million cash for use as a parking lot.
5. On December 30, 2016, new equipment was acquired by issuing a 12%, five-year, $20 million
note payable to seller.
6. On January 1, 2016, $15 million of bonds (issued 20 years ago at their face amount) was
retired at maturity.
7. The increase in common stock account is atributable to the issuance of a 10% stock dividend
(1 million share) and the subsequent sale of 2 million shares of common stock. The market price
of the $10 par value common stock was $13 per share on the dates of both transactions.
UNITED BRANDS CORPORATION
Comparative Balance Sheet
December 31, 2016 and 2015
($ in millions)
Assets
2016
2015
Cash
$29
$20
Accounts Receivable
32
30
Short-term Investments
12
0
Inventory
46
50
Prepaid Insurance
3
6
Land
80
60
Building and Equipment
81
75
Less: Accumulated Depreciation
(16)
(20)
$267
$221
Liabilities
Accounts Payable
$26
$20
Salaries Payable
3
1
Income Tax Payable
6
8
Notes Payable
20
0
Bonds Payable
35
50
Less: Discount on bonds
(1)
(3)
Shareholder’s Equity
Common Stock
130
100
Paid-in Capital
29
20
Retained Earnings
19
25
$267
$221
Income Statement
Sales Revenue
$100
Cost of Goods Sold
60
Gross Profit
40
Operating Expenses:
Salaries Expense
13
Depreciation Expense
3
Bond Interest Expense
5
Insurance Expense
7
Total Operating Expenses
28
Other Income (Expenses)
Investment Revenue
3
Gain on Sale of Land
8
Loss on Sale of Equipment
(2)
Total other income (expenses)
9
Income before income taxes
21
Income tax expense
9
Net Income
12
Solution
Direct Method Cash Flow Satement United Brands Corporation Cash flows from operating
activities: From customers 98 From investment .
Disha NEET Physics Guide for classes 11 and 12.pdf
Prepare statement of cash flows using the direct and indirect method.pdf
1. Prepare statement of cash flows using the direct and indirect method.
UNITED BRANDS CORPORATION
Comparative Balance Sheet
December 31, 2016 and 2015
($ in millions)
Assets
2016
2015
Cash
$29
$20
Accounts Receivable
32
30
Short-term Investments
12
0
Inventory
46
50
Prepaid Insurance
3
6
Land
80
60
Building and Equipment
81
75
Less: Accumulated Depreciation
(16)
(20)
$267
$221
Liabilities
2. Accounts Payable
$26
$20
Salaries Payable
3
1
Income Tax Payable
6
8
Notes Payable
20
0
Bonds Payable
35
50
Less: Discount on bonds
(1)
(3)
Shareholder’s Equity
Common Stock
130
100
Paid-in Capital
29
20
Retained Earnings
19
25
$267
$221
Income Statement
Sales Revenue
$100
Cost of Goods Sold
60
Gross Profit
3. 40
Operating Expenses:
Salaries Expense
13
Depreciation Expense
3
Bond Interest Expense
5
Insurance Expense
7
Total Operating Expenses
28
Other Income (Expenses)
Investment Revenue
3
Gain on Sale of Land
8
Loss on Sale of Equipment
(2)
Total other income (expenses)
9
Income before income taxes
21
Income tax expense
9
Net Income
12
Additional Information
1. Company land, purchased in a previous year for $10 million, was sold.
2. Equipment that originally cost $14 million and which was one-half depreciation, was sold.
3. The common shares of Mazuma C. were purchased for $12 million as a short-term investment.
4. Property was purchased for $30 million cash for use as a parking lot.
5. On December 30, 2016, new equipment was acquired by issuing a 12%, five-year, $20 million
note payable to seller.
6. On January 1, 2016, $15 million of bonds (issued 20 years ago at their face amount) was
retired at maturity.
4. 7. The increase in common stock account is atributable to the issuance of a 10% stock dividend
(1 million share) and the subsequent sale of 2 million shares of common stock. The market price
of the $10 par value common stock was $13 per share on the dates of both transactions.
UNITED BRANDS CORPORATION
Comparative Balance Sheet
December 31, 2016 and 2015
($ in millions)
Assets
2016
2015
Cash
$29
$20
Accounts Receivable
32
30
Short-term Investments
12
0
Inventory
46
50
Prepaid Insurance
3
6
Land
80
60
Building and Equipment
81
75
Less: Accumulated Depreciation
(16)
(20)
$267
$221
5. Liabilities
Accounts Payable
$26
$20
Salaries Payable
3
1
Income Tax Payable
6
8
Notes Payable
20
0
Bonds Payable
35
50
Less: Discount on bonds
(1)
(3)
Shareholder’s Equity
Common Stock
130
100
Paid-in Capital
29
20
Retained Earnings
19
25
$267
$221
Income Statement
Sales Revenue
$100
Cost of Goods Sold
60
6. Gross Profit
40
Operating Expenses:
Salaries Expense
13
Depreciation Expense
3
Bond Interest Expense
5
Insurance Expense
7
Total Operating Expenses
28
Other Income (Expenses)
Investment Revenue
3
Gain on Sale of Land
8
Loss on Sale of Equipment
(2)
Total other income (expenses)
9
Income before income taxes
21
Income tax expense
9
Net Income
12
Solution
Direct Method Cash Flow Satement United Brands Corporation Cash flows from operating
activities: From customers 98 From investment revenue 3 Cash outflows: To suppliers
of goods -50 To employees -11 For interest -3 For insurance -4 For income taxes -11
Net cash flows from operating activities 22 Cash flows from investing activities: Purchase of
land -30 Purchase of short-term investment -12 Sale of land 18 Sale of equipment 5 Net
cash flows from investing activities -19 Cash flows from financing activities: 26 Sale of
7. common shares -15 Retirement of bonds payable -5 Payment of cash dividends -6 Net cash
flows from financing activities 9 Cash balance, January 1 20 Cash balance, December 31 29
Indirect Method Cash Flow Statement United Brands Corporation Net income 12
Adjustments for noncash effects: Gain on sale of land -8 Depreciation expense 3 Loss on
sale of equipment 2 Changes in operating assets and liabilities: Increase in accounts
receivable -2 Decrease in inventory 4 Increase in accounts payable 6 Increase in salaries
payable 2 Discount on bonds payable 2 Decrease in prepaid insurance 3 Decrease in
income tax payable -2 Net cash flows from operating activities 22 Cash flows from investing
activities: Purchase of land -30 Purchase of short-term investment -12 Sale of land 18
Sale of equipment 5 Net cash flows from investing activities -19 Cash flows from financing
activities: 26 Sale of common shares -15 Retirement of bonds payable -5 Payment of cash
dividends -6 Net cash flows from financing activities 9 Cash balance, January 1 20 Cash
balance, December 31 29