Prepare statement of cash flows using the direct and indirect method.
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UNITED BRANDS CORPORATION
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Comparative Balance Sheet
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December 31, 2016 and 2015
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($ in millions)
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Assets
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2016
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2015
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Cash
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$29
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$20
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Accounts Receivable
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32
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30
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Short-term Investments
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12
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0
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Inventory
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46
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50
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Prepaid Insurance
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3
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6
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Land
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80
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60
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Building and Equipment
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81
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75
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Less: Accumulated Depreciation
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-16
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-20
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$267
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$221
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Liabilities
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Accounts Payable
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$26
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$20
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Salaries Payable
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3
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1
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Income Tax Payable
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6
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8
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Notes Payable
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20
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0
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Bonds Payable
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35
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50
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Less: Discount on bonds
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-1
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-3
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Shareholder's Equity
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Common Stock
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130
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100
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Paid-in Capital
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29
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20
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Retained Earnings
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19
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25
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$267
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$221
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Income Statement
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Sales Revenue
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$100
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Cost of Goods Sold
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60
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Gross Profit
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40
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Operating Expenses:
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Salaries Expense
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13
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Depreciation Expense
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3
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Bond Interest Expense
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5
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Insurance Expense
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7
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Total Operating Expenses
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28
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Other Income (Expenses)
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Investment Revenue
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3
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Gain on Sale of Land
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8
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Loss on Sale of Equipment
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-2
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Total other income (expenses)
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9
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Income before income taxes
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21
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Income tax expense
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9
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Net Income
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12
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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 attributable 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.