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 .

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