Complete Statement of Cash Flows
Below are balance sheet and income statement data for Eunice Burns Company.
|
Balance Sheet |
||
|
|
2008 |
2007 |
|
Cash |
$ 357 |
$ 220 |
|
Accounts receivable |
736 |
614 |
|
Allowance for bad debts |
100 |
76 |
|
Investment securities (trading) |
65 |
80 |
|
Inventory |
1,023 |
1,506 |
|
Prepaid selling and administrative expenses |
11 |
26 |
|
Investment securities (available for sale) |
135 |
100 |
|
Property, plant, and equipment |
7,700 |
6,650 |
|
Accumulated depreciation |
1,400 |
1,090 |
|
Investment in Sub Company |
170 |
0 |
|
Capitalized software development costs |
92 |
0 |
|
Deferred income tax asset |
104 |
82 |
|
Intangible assets |
600 |
660 |
|
Accounts payable |
200 |
270 |
|
Interest payable |
50 |
80 |
|
Income taxes payable |
42 |
26 |
|
Sales revenue received in advance |
1,340 |
1,060 |
|
Dividends payable |
189 |
90 |
|
Long term debt |
1,958 |
2,774 |
|
Accrued pension cost |
860 |
790 |
|
Convertible preferred stock |
0 |
450 |
|
Common stock (no par) |
3,088 |
2,232 |
|
Retained earnings |
1,766 |
1,000 |
|
Income Statement (for 2008) |
||
|
Sales |
|
$22,680 |
|
Income from Sub Company |
|
30 |
|
Gain on sale of property, plant, and equipment |
|
120 |
|
Cost of goods sold |
$14,800 |
|
|
Selling and administrative expenses |
3,710 |
|
|
Pension expense |
130 |
|
|
Interest expense |
240 |
|
|
Depreciation expense |
580 |
|
|
Amortization expense |
88 |
|
|
Unrealized holding loss on investment securities |
20 |
|
|
Income tax expense |
1,200 |
|
|
Total expenses and losses |
|
20,618 |
|
Net income |
|
$ 2,062 |
Additional information for Eunice Burns Company is as follows:
(a) Bad debt expense of $160 is included in selling and administrative expenses.
(b) Property, plant, and equipment was sold during 2008 for $600 cash.
(c) All accounts payable relate to inventory purchases.
(d) During 2008, Eunice Burns capitalized $65 of interest associated with the construction of a building. None of the interest payable relates to this capitalized interest.
(e) On July 15, 2008, Eunice Burns repurchased shares of its own stock for $75. On December 19, 2008, Eunice Burns resold the shares for $50. Eunice Burns uses the cost method for accounting for treasury stock.
(f) On November 17, 2008, Eunice Burns declared and issued a 5% stock dividend. The number of shares of common stock outstanding increased from 100 to 105. After the stock dividend, the market price per share of common stock was $70.
(g) During the year, Eunice Burns capitalized $120 in expenditures for software. The capitalized costs are being amortized over the estimated useful life of the development costs.
(h) On January 1, 2008, Eunice Burns signed an agreement to lease a piece of equipment. The lease is being accounted for as a capital lease. The annual lease payment is $40. The present value of the minimum lease payments is $199. The leased asset has been included in property, plant, and equipment, and the lease liability is included in long term debt. The lease term is eight years, and the implicit interest rate is 12%.
(i) Eunice Burns uses the LIFO method of inventory valuation. During the year, Eunice Burns dipped into its LIFO layers. As a result, cost of goods sold was $116 lower than it otherwise would have been.
(j) On January 1, 2008, Eunice Burns purchased 30% of Sub Company for $150 cash. At the time, the book value of Sub’s net assets was $500. Net income for 2008 for Sub Company was $100.
(k) During the year, all of the convertible preferred stock was converted into shares of Eunice Burns common stock.
Instructions: Prepare a complete statement of cash flows for 2008 for Eunice Burns Company. Use the direct method for reporting cash flows from operating activities.