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).

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter3: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 19SP
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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:

  1. Investment revenue includes Arduous Company’s $25 million share of the net income of Demur Company, an equity method investee.
  2. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
  3. 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.
  4. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $22 million.
  5. The preferred stock of Tory Corporation was purchased for $44 million as a long-term investment.
  6. Land costing $66 million was acquired by issuing $33 million cash and a 10%, four-year, $33 million note payable to the seller.
  7. 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.
  8. $79 million of bonds were retired at maturity.
  9. 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.
  10. 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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