Reference no: EM13498275

Question V Columbia Sportswear

The comparative balance sheet from Columbia Sportswear's 2011 financial statements appears below:

Columbia Sportswear

Statement of Financial Position

As of December 31, 2010 and 2011

(amounts in $millions)

Assets	2011	2010
Cash	$  130	$  104
Short-term investments	145	160
Accounts receivable	267	206
Inventories	165	126
Deferred income taxes	22	17
Prepaid expenses	10	5
Total current assets	$  739	$  618
Property, plant, and equipment, net	155	126
Goodwill and other intangibles	38	37
Total assets	$  932	$  781
Liabilities and shareholders' equity
Accounts payable	$   78	$   62
Accrued liabilities	51	42
Income taxes payable	12	8
Long-term debt (including current maturities)	16	21
Deferred income taxes	11	9
Total liabilities	$  168	$  142
Shareholders' equity	764	639
Total liabilities and shareholders' equity	$  932	$  781

 

The Income Statement for the year ended December 31, 2011 appears below:

 

Columbia Sportswear

Income Statement

For the Year Ended December 31, 2011

(amounts in $millions)

 

Sales Revenue	$1,095
Cost of Sales	597
Gross profit	498
Selling, general and administrative expense	291
Net licensing income	(4)
Income from operations	211
Interest income	(4)
Interest expense	1
Income before income tax	214
Income tax expense	76
Net income	138

 

Other information:

• The following amounts were included in selling, general and administrative expense:
  • Loss on sale of equipment $8 (million)
  • Depreciation on property, plant and equipment $21 (million)
  • Amortization of intangible assets $5 (million)
• No gain or loss was reported on the sale of short term investments
• No short term investments were purchased in 2011
• During 2011, Columbia received $6 (million) cash from the sale of property, plant and equipment.
• Columbia pays cash to acquire property, plant, and equipment and intangible assets.
• No long-term debt was issued in 2011
• Columbia declared and paid cash dividends of $16 (million) in 2011

 

Buffy Warren, a successful but frugal investor, doesn't understand the information provided by the Statement of Cash Flows, because it is presented using the indirect method.  Fortunately, you were seated next to Ms. Warren on an airplane (in coach) and offered to help.  Please answer the following questions: (Round to $millions.)

1.    Assume that all sales are credit sales; calculate the amount of cash received from customers during 2011.

2.    Assume that cost of sales represents only the cost of inventory that is sold to customers and that accounts payable represents only amounts payable to suppliers of inventory.  Calculate the amount of cash paid to suppliers during 2011.

3.    Calculate the amount paid to purchase property, plant and equipment during 2011.

4.    Calculate the proceeds form the sale of short term investments during 2011.