Reference no: EM132512709

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous's accounting records is provided also.

ARDUOUS COMPANY

Comparative Balance Sheets

December 31, 2018 and 2017

($ in millions)                                           2018                         2017

Assets

Cash                                                    $130                       $91

Accounts receivable                                 200                           214

Investment revenue receivable                      15                            14

Inventory                                                    216                             210

Prepaid insurance                                            13                              22

Long-term investment                                     185                            135

Land                                                                  216                       160

Buildings and equipment                                      422                      420

Less:

Accumulated depreciation                                    (109)                 (140)

Patent                                                                     44                     45

                                                                         $1,332                    $1,171

Liabilities Accounts payable                                      $60                            $85

Salaries payable                                                      15                                30

Bond interest payable                                               17                            14

Income tax payable                                                   22                            28

Deferred income tax liability                                         31                            18

Notes payable                                                           28                               0

Lease liability                                                            86                                0

Bonds payable                                                          225                               295

Less:

Discount on bonds                                                     (32)                               (39)

Shareholders' Equity Common stock                                460                                   420

Paid-in capital-excess of par                                            115                                   95

Preferred stock                                                                 85                                     0

Retained earnings                                                                239                                   225

Less: Treasury stock                                                         (19)                                   0

                                                                                      $1,332                             $1,171

ARDUOUS COMPANY

Income Statement

For Year Ended December 31, 2018

($ in millions)Revenues and gain:

Sales revenue$494

Investment revenue 20

Gain on sale of treasury bills 1 $515

Expenses and loss: Cost of goods sold 190

Salaries expense 83

Depreciation expense 14

Patent amortization expense 1

Insurance expense 17

Bond interest expense 38

Loss on machine damage 25

Income tax expense 46

414

Net income $101

Additional information from the accounting records:

1. Investment revenue includes Arduous Company's $15 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2018 at a gain of $1 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. A machine originally costing $90 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $20 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $13 million.
5. The preferred stock of Tory Corporation was purchased for $35 million as a long-term investment.
6. Land costing $56 million was acquired by issuing $28 million cash and a 10%, four-year, $28 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, $92 million. Annual lease payments of $6 million are paid at the beginning of each year starting January 1, 2018.
8. $70 million of bonds were retired at maturity.
9. In February, Arduous issued a stock dividend (8.0 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. Also the company paid a cash dividend.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $19.00 million.

Required:

Question 1: Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)