Comparative balance sheets for 20X1 and 20X0, a statement of income for 20X1, and additional information from the accounting records of Nardo, Inc., are provided below.

NARDO, INC.
Comparative Balance Sheets
December 31, 20X1 and 20X0 ($ in millions)
20X1 20X0
Assets
Cash $ 24 $ 110
Accounts receivable 178 132
Prepaid insurance 7 3
Inventory 285 175
Buildings and equipment 400 240
Less: Accumulated depreciation (119) (130)
$ 775 $ 530
Liabilities
Accounts payable $ 87 $ 100
Accrued liabilities 6 11
Notes payable 50 0
Bonds payable 160 0
Shareholders’ Equity
Common stock 400 400
Retained earnings 72 19
$ 775 $ 530

NARDO, INC.
Statement of Income
For Year Ended December 31, 20X1
($ in millions)
Revenues
Sales revenue $2,000
Expenses
Cost of goods sold $1,400
Depreciation expense 50
Operating expenses 447 1,897
Net income $ 103

 

During 20X1, $260 million of equipment was purchased (and paid cash) to replace $100 million of equipment (61% depreciated) sold at book value (cash).
Required:
Use the information above to calculate the various individual accruals and reconcile the net income with the cash flow for the year 20X1 for Nardo, Inc.. For each accrual indicate the extent to which it may be considered discretionary (or not) and explain why

Answer rating: 100% (QA)

NAROD INC CASH FLOW STATEMENT INDIRECT METHOD FOR THE YEAR ENDED DECEMBER 3120... View the full answer