Question

The income statement and a schedule reconciling cash flowsfrom operating activities to net income are provided below forMacrosoft Corporation.

MACROSOFT CORPORATION

Income Statement

For the Year Ended December 31, 2016

($ in millions)

Revenues and gains:

Sales $ 318.00

Gain on sale of cash equivalents 2.40

Gain on sale of investments 24.40 $ 344.80

Expenses and loss:

Cost of goods sold $ 124.00

Salaries 40.40

Interest expense 12.40

Insurance 20.40

Depreciation 10.40

Patent amortization 4.40

Loss on sale of land 6.40 218.40

Income before tax 126.40

Income tax expense 63.20

Net income $ 63.20

Reconciliation of Net Income

to Net Cash Flows

from Operating Activities

($ in millions)

Net income $ 63.20

Adjustments for noncash effects:

Depreciation expense 10.40

Patent amortization expense 4.40

Loss on sale of land 6.40

Gain on sale of investment (24.40 )

Decrease in accounts receivable 6.40

Increase in inventory (12.40 )

Increase in accounts payable 18.40

Decrease in bond discount 1.40

Increase in salaries payable 6.40

Decrease in prepaid insurance 4.40

Increase in income tax payable 10.40

Net cash flows from operating activities $ 95.00

Required:

Prepare the cash flows from operating activities section ofthe statement of cash flows (direct method). (Enter your answers inmillions rounded to 2 decimal places (i.e., 5,500,000 should beentered as 5.50). Amounts to be deducted should be indicated with aminus sign.)

ReferenceseBook & Resources

WorksheetLearning Objective: 21-03 Determine cash flows fromoperating activities by the direct method.

Difficulty: 3 HardLearning Objective: 21-04 Determine cashflows from operating activities by the indirect method.

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