Quiz 2 part 1 10 points Using the following income statement

Quiz 2 part 1 (10 points). Using the following income statement and balance sheet prepare the financial statement of cash flow (format it on the next page) and submit it via dropbex by 01/28/2018 Nabors, Inc. 2011 Income Statement (S in millions) $9,610 6,310 Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid Taxable Income Less: Taxes Net income 370 1,930 $1,300 $ 845 Nabors, Inc 2010 and 2011 Balance Sheets (S in millions) 2010 2011 2011 S 310 S 405 2,640 3,055 2010 Accounts payable Notes payable S 2,720 S 2,570 Cash Accounts ree. Inventory Total Net fixed assets 3,2753.850 Total S6225 S 7310Long-term debt 7,875 5,000 -490 8,100 5,250 ,060 S17.980 0960-10670 Common stock Retained earnings Total asset S17,185 S17,980 Total liab.& equity S17185 Note: Retained carnings.is listed as a separate line item in this balance sheet (where as retained earnings were part of common stock in the balance sheet before)

Solution

1) STATEMENT OF CASH FLOWS Cash flows from operating activities: Net income 845 Adjustments to reconcile net income with net cash from operating activities: Depreciation 1370 Increase in accounts receivable -415 Increase in inventory -575 Decrease in accounts payable -150 230 Net cash provided by operating activities 1075 Cash flows from investing activities: Purchase of equipment (10670-10960+1370) -1080 Net cash used by operating activities -1080 Cash flows from financing activities: Increase in long term debt (8100-7875) 225 Redemption of notes payable -100 Dividends paid (2060-1490-845) -275 Common stock issued 250 Net cash used by financing activitie 100 Net increase in cash and cash equivalents 95 Cash & cash equivalents at the beginning of year 310 Cash & cash equivalents at the end of year 405 2)a) CASH FLOW FROM ASSETS (Using the formulae given) Operating cash flow = 1930+1370-455= 2845 Net capital spending = 10670-10960+1370 = 1080 Changes in NWC = (7310-2570)-(6225-2720) = 1235 CASH FLOW FROM ASSETS (2845-1080-1235) = 530 2)b) CASH FLOW TO CREDITORS = 630-125 = 505 2)c) CASH FLOW TO STOCKHOLDERS = 275-250 = 25