P11-46.

Required

a. Compute the change in cash that occurred during 2019.

b. Prepare a 2019 statement of cash flows using the indirect method.

Statement of Cash Flows (Indirect Method)

Dair Company's income statement and comparative balance sheets follow.

Joel

Tuoriniemi

Sales.

Cost of goods sold

Wages and other operating expenses

DAIR COMPANY

Income Statement

For Year Ended December 31, 2019

Depreciation expense..

Amortization expense

Interest expense..

Income tax expense.

Loss on bond retirement.

Net Income

Assets

Cash..

Accounts receivable

zien

Inventory.

Prepaid expenses.

Accumulated depreciation

DAIR COMPANY

Balance Sheet

Total assets

Liabilities and Stockholders' Equity

Accounts payable

Interest payable

Income tax payable

Bonds payable..

Common stock.

Retained earnings

Totallables and equity.

$440,000

95,000

22,000

7,000

10,000

36,000

5.000

Dec. 31, 2019

$ 27,000

53,000

103,000

12,000

350,000

(87,000)

43,000

$511,000

$ 30,000

4,000

6,000

60,000

252,000

157,000

$511,000

Required

a. Compute the change in cash that occurred in 2019.

b. Prepare a 2019 statement of cash flows using the indirect method.

$700,000

615,000

$ 85,000

Dec. 31, 2018

$ 18,000

48,000

109,000

10,000

336,000

(84,000)

50,000

$487,000

$ 26,000

7,000

8,000

120,000

228,000

98,000

$487,000

Joel Tu

During 2019, the company sold for $17,000 cash old equipment that had cost $36,000 and had $19,000

accumulated depreciation. Also in 2019, new equipment worth $60,000 was acquired in exchange for

$60,000 of bonds payable, and bonds payable of $120,000 were retired for cash at a loss. A $26,000

cash dividend was declared and paid in 2019. Any stock issuances were for cash.

LO2, 3, 4

iniemi

4. Prepare separate schedules showing (1) cash paid for interest and for income taxes and

(2) noncash investing and financing transactions

M

Joel Tuori

ziemi

MBC/nP11-49. Interpreting the Statement of Cash Flows

Following is the statement of cash flows for Stryker Corp.

Operating activities

Net earnings (loss)....

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation...

STRYKER CORPORATION

Consolidated Statements of Cash Flows

For Year Ended December 31, 2018 ($ millions)

Amortization of intangible assets

Share-based compensation..

Recall charges, net of insurance e proceeds

Sale of inventory stepped up to fair value at acquisition

Deferred income tax benefit (expense)

Changes in operating assets and liabities

Accounts receivable.

Inventories

Accounts payable

Accrued expenses and other labilises

Recall-related payments...

Income taxes....

Other, not

Net cash provided by operating activities.

Investing activities

Acquisitions, net of cash acquired

Tuorinier

Purchases of marketable securities.

Proceeds from sales of marketable securities

Purchases of property, plant and equipment

Other investing, net

Net cash used in investing activities..

Financing activities

Proceeds and payments on short-term borrowings, net.

Proceeds from issuance of long-term debt.

Payments on long-term debt

Dividends paid

Repurchase of common stock

Cash paid for taxes from withheld shares

Payments to purchase noncontrolling interest.

Other financing.net.

Net cash provided by (used in) financing activities.

Effect of exchange rate changes on cash and cash equivalents

Change in cash and cash equivalents.

Cash and cash equivalents at beginning of year.

Cash and cash equivalents at end of year..

[******** (1993

Tuorinien

$3,553

(1,582)

(2,451)

(2,857)

1,074

$3,616

Required

a. Why does the company add back depreciation to compute net cash flows from operating activities?

6. Explain why the change in accounts receivable and inventories are reported as adjustments to net

earnings. Did the accounts receivable and inventories balances increase or decrease during the

year?

e. Stryker reports that it invested $572 million in property, plant and equipment. Is this an appropriate

type of expenditure for the company to make? What relation should expenditures for PPE have

with depreciation expense?

Stryker paid $300 million to repurchase its common stock in fiscal 2018 and, in addition, paid

dividends of $703 million. Thus, it paid $1,003 million of cash to its stockholders during the year.

How do we evaluate that use of cash relative to other possible uses for the company's cash?

Joel Tuorin

e. Provide an overall assessment of the company's cash flows for fiscal 2018. In the analysis, com-

sider the sources and uses of cash.

el Ti

LO1, 2, 3, 4, 5

Stryker Corp. (SVK)

mi/n