Question

The following information is available from Gray Co.'s accounting records for the year ended December 31, 2016 (amounts in millions):

Cash dividends declared and paid	$	525
Retirement of bonds payable at maturity		300
Interest and taxes paid		220
Proceeds of common stock issued		825
Proceeds from the sale of land		250
Collections from customers		4,720
Cash paid to suppliers and employees		?
Purchase of buildings and equipment		?

a. The net cash provided by operating activities for Gray Co. for the year ended December 31, 2016, is $1,800 million. Calculate the cash paid to suppliers and employees. (Enter your answer in millions. (i.e., 5,000,000 should be entered as 5))

b. The increase in cash for the year was $400 million. Calculate the amount of cash used to purchase buildings and equipment. Your answer to part a should be considered in your calculation. (Hint: Set up a model of the statement of cash flows to determine the net cash provided [used] by operating and investing activities, and then solve for the missing amounts.) (Enter your answer in millions. (i.e., 5,000,000 should be entered as 5))

Answer 1

Net Cash provided by operating activities = Collections from customers – Interest and taxes paid – Cash paid to suppliers and employees

1800 = 4720-220 – Cash paid to suppliers and employees

Hence, cash paid to suppliers and employees = $2,700 million

b.Cash increase during the year = Cash flow from operating activities + cash flow from investing activities + cash flow from financing activities

400 million = 1800 + Investing + (-525-300+825)

Cash flow from investing activities = -1400 million

Proceeds from sale of land – Purchase of buildings and equipment = -1400 million

250 – Purchase of buildings and equipment = -1400

Purchase of buildings and equipment = 1,650 million