Gillette Limited borrowed 250 million on October 1 by issuing
Gillette Limited borrowed £250 million on October 1 by issuing bonds. The debt carries an annual interest rate of 6%, which it must pay on April 1 and October 1 of each year. The debt matures 20 years after its issue date. Gillette’s accounting period ends on December 31 of each year. Using the format of Exhibit 6.12, indicate the effects of all these transactions on Gillette’s statement of cash flows for the year of issue, when the bonds were outstanding from October 1 through December 31.
Exhibit 6.12.
OPERATIONS
Cash Receipts from Customers . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . (1)
Less: Cash Payments to Suppliers, Employees, and Others. . . . . . . . . . −(2)
Cash Flow from Operations [= (1) – (2)]. . . . . . . . . . . . . . . . . . . . . . . . . −S1
Reconciliation of Net Income to Cash Flow from Operations
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3)
Additions to Net Income to Compute Cash Flow from Operations .. . . . . +(4)
Subtractions from Net Income to Compute Cash Flow from Operations . −(5)
Cash Flow from Operations [= (3) + (4) – (5)] . . . . . . . . . . . . . . . . . . . . . . . S1
INVESTING
Proceeds from Dispositions of “Investing” Assets . . . . . . . . . . . . . . . . . . . +(6)
Cash Used to Acquire “Investing” Assets. . . . . . . . . . . . . . . . . . . . . . . . . . −(7)
Cash Flow from Investing [= (6) – (7)] . . . . . . . . . . . . . . . . . . . . . . . . . . .. . S2
FINANCING
Cash Provided by Increases in Debt or Capital Stock . . . . . . . . . . . . . . .. . +(8)
Cash Used to Reduce Debt or Capital Stock . . . . . . . . . . . . . . . . . . . . . . . −(9)
Cash Used for Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . −(10)
Cash Flow from Financing [= (8) – (9) – (10)] . . . . . . . . . . . . . . . . . . . . . . S3
Net Change in Cash [= S1 + S2 + S3]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)
Cash, Beginning of the Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . S4
Cash, End of the Period [= (11) + S4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S5

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