Question

PROBLEM 14-12 Prepare a statement of Cash Flows (L014-1, L014-2] A comparative balance sheet and an income statement for Burgess Company are given below: Burgess Company Comparative Balance Sheet (dollars in millions) Ending Balance Beginning Balance $ 79 580 5 $ 49 645 660 1,354 1,515 765 750 $2,104 466 1 $2,099 Assets Current assets: Cash and cash equivalents ... Accounts receivable Inventory Total current assets ........... Property, plant, and equipment. Less accumulated depreciation .. Net property, plant, and equipment.... Total assets ..... Liabilities and Stockholders' Equity Current liabilities: Accounts payable ... Accrued liabilities ........... Income taxes payable ......... Total current liabilities. Bonds payable............ Total liabilities ............ Stockholders' equity: Common stock Retained earnings ... Total stockholders' equity ........... Total liabilities and stockholders' equity ..... $ 250 $ 155 165 151 010 161 161 1,089 $2,099 Burgess Company Income Statement (dollars in millions) Net sales ....... Cost of goods sold ...... Gross margin Selling and administrative expenses ...... Net operating income ... Nonoperating items: Gain on sale of equipment .... Income before taxes... Income taxes ........................... Net income ................................ $3,600 2,550 1,050 875 175 115 Burgess also provided the following information: 1. The company sold equipment that had an original cost of $13 million and accumulated depre- ciation of $8 million. The cash proceeds from the sale were $8 million. The gain on the sale was $3 million 2. The company did not issue any new bonds during the year. 3. The company paid a cash dividend during the year. 4. The company did not complete any common stock transactions during the year. Required: 1. Using the indirect method, prepare a statement of cash flows for the year. 2. Assume that Burgess had sales of $3,800, net income of $135, and net cash provided by oper ating activities of $150 in the prior year (all numbers are stated in millions). Prepare a memo that summarizes your interpretations of Burgess's financial performance.