# A comparative balance sheet and an income statement for Blankley Company are given below: Blankley Company Income

## Question:

A comparative balance sheet and an income statement for Blankley Company are given below:

Blankley Company
Income Statement
(dollars in millions)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,700 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,540 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 Selling and administrative expenses . . . . . . . . . . . . . 880 Net operating income . . . . . . . . . . . . . . . . . . . . . . . . 280 Nonoperating items: Gain on sale of equipment . . . . 2 Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 282 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 170

Blankley also provided the following information:
1. The company sold equipment that had an original cost of $12 million and accumulated depreciation of$7 million. The cash proceeds from the sale were $7 million. The gain on the sale was$2 million.
2. The company did not issue any new bonds during the year.
3. The company paid a cash dividend during the year.
4. The company did not complete any common stock transactions during the year.

Required:
1. Using the indirect method, prepare a statement of cash flows for the year.
2. Assume that Blankley had sales of $3,900, net income of$190, and net cash provided by operating activities of \$160 in the prior year (all numbers are stated in millions). Prepare a memo that summarizes your interpretations of Blankley€™s financialperformance.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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