7-Xylon - 80 80-Retained earnings 10 6 6 $ 178 $ 120 $ 60...

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XYLON COMPANY The 2003 financial statements for Xylon Company are summarized as follows: Income Statement and Statement of Retained Earnings For the Year Ended December 31, 2003 (millions of dollars) ________________________________________________ Sales revenue $100 Less: Cost of goods sold 65 Gross profit $ 35 General and administrative expenses $ 6 Depreciation 12 Insurance expenses 3 Interest expense 4 Loss on disposal 2 Net income $ 8 Retained earnings, December 31, 1998 6 Total $ 14 Dividends 4 Retained earnings, December 31, 1999 $ 10 Balance Sheets as of December 31, 2003 (millions of dollars) 2003 2002 Increase (Decrease) Assets Cash $ 3 $ 27 $ (24) Accounts receivable 30 10 20 Inventory 51 26 25 Prepaid insurance expenses 3 2 1 Fixed assets, net 91 55 38 $ 178 $ 120 $ 60 Equities Accounts payable $ 38 $ 24 $ 14 Long-term debt 50 10 40 Capital stock
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Unformatted text preview: 80 80--Retained earnings 10 6 6 $ 178 $ 120 $ 60 In 2003, Xylon paid $60 million cash for a new building acquired to accommodate an expansion of operations. This was financed partly by a new issue of long-term debt for $40 million cash. During 2003, the company also sold fixed assets for $10 million. Mr. Xylon, the chairman of the board of the Xylon Company, was perplexed by the company's extremely low cash balance despite the net income of $8 million, the highest in the company's history. Required : 1. Prepare a statement of cash flows for Xylon using the indirect method. (Ignore income taxes). 2. What is revealed by the statement of cash flows? Does it help you reduce Mr. Xylon's puzzlement? Why?...
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This note was uploaded on 05/04/2008 for the course ACCT 3320 taught by Professor Frankzhang during the Summer '06 term at University of Texas at Dallas, Richardson.

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