7/31/2021 Course ID: 16382 - After Class Practice 7/21 - Answer sheet

After Class Practice 7/21 - Alexia Victor (alexia.victor@stern.nyu.edu) | Copyright  2021 Cambridge Business Publishers, All Rights Reserved
Question 1 Marked out of 10.00

M11-23. Classification of Cash Flows

Fitbit Inc. reports the following items in its 2018 statement of cash flow. For each item,
indicate whether it would appear in the
operating, investing, or financing section of the statement of
cash flows (in $ thousands).
Activity
a. Change in accounts payable $      35,207 Operating 
b. Repayment of debt 747 Financing 
c. Stock-based compensation 97,009 Operating 
d. Proceeds from issuance of common stock 21,470 Financing 
e. Change in inventories (12,860) Operating 
f. Purchase of property and equipment (52,880) Investing 
g. Acquisitions, net of cash acquired (19,253) Investing 
h. Net loss (185,829) Operating 
i. Depreciation 48,889 Operating 
j. Purchase of marketable securities (353,948) Investing 

Question 2 Marked out of 3.00

Operating Cash Flows (Direct Method)

Calculate the cash flow for each of the following cases.

a.Cash paid for rent: $ 62,000 

Rent expense $65,000
Prepaid rent, beg. year 11,000
Prepaid rent, end of year 8,000
b. Cash received as interest: $ 14,700 
Interest income $15,500
Interest receivable, beg. year 3,000
Interest receivable, end of year 3,800
c. Cash paid for merchandise purchased: $ 94,000 
Cost of goods sold $87,000
Inventory, beg. year 19,000
Inventory, end of year 23,000
Account payable, beg. year 11,000
Accounts payable, end of year 8,000

Question 3 Marked out of 13.00

Operating Section of Statement of Cash Flows (Indirect Method)

Following are the income statement and balance sheet for Nike Inc. for the year ended May 31, 2019, and a forecasted income
statement and balance sheet for 2020.

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7/31/2021 Course ID: 16382 - After Class Practice 7/21 - Answer sheet

Nike Inc.

Income Statement

For Year Ended May 31

After Class Practice 7/21 - Alexia Victor (alexia.victor@stern.nyu.edu) | Copyright  2021 Cambridge Business Publishers, All Rights Reserved
$ millions 2019 actual 2020 Est.
Revenues $ 39,117 $ 42,246
Cost of sales 21,643 23,362
Gross profit 17,474 18,884
Demand creation expense 3,753 4,056
Operating overhead expense 8,949 9,674
Total selling and administrative expense 12,702 13,730
Interest expense (income), net 49 49
Other (income) expense, net (78) (78)
Income before income taxes 4,801 5,183
Income tax expense 772 1,037
Net income $ 4,029 $ 4,146

 
NIKE INC.

Balance Sheet

May 31
$ millions 2019 Actual 2020 Est.
Current Assets
Cash and equivalents $ 4,466 $ 6,881
Short-term investments 197 197
Accounts receivable, net 4,272 4,605
Inventories 5,622 6,083
Prepaid expenses and other current assets 1,968 2,112
Total current assets 16,525 $19,878
Property, plant and equipment, net 4,744 5,259
Identifiable intangible assets, net 283 281
Goodwill 154 154
Deferred income taxes and other assets 2,011 2,155
Total Assets $ 23,717 $ 27,727
     
Current liabilities
Current portion of long-term debt $6 $3
Notes payable 9 0
Accounts payable 2,612 2,830
Accrued liabilities 5,010 5,407
Income taxes payable 229 253
Total current liabilities 7,866 8,493
Long-term debt 3,464 3,461
Deferred income taxes and other liabilities 3,347 3,633
Total liabilities 14,677 15,587
Shareholders’ equity:    
     
Common stock at stated value 3 3
Capital in excess of stated value 7,163 7,488
Accumulated other comprehensive income 231 231
Retained earnings 1,643 4,418
Total shareholders’ equity 9,040 12,140
Total liabilities and shareholders’ equity $23,717 $27,727

Prepare the net cash flows from operating activities section of a forecasted statement of cash flows
for 2020 using the indirect
method. Treat deferred tax assets and liabilities as
operating. Operating expenses (cost of sales) for 2020 include estimated
depreciation expense of $751 million and amortization expense of $2 million, and stock-based compensation of $325 million.
(Hint: Stock-based compensation is a noncash expense like depreciation and must be added back in the operating section. The
amount expensed is also added to Nike’s “Capital in excess of stated value” account in the balance sheet.)
Use negative signs with answers to show a decrease in cash.

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7/31/2021 Course ID: 16382 - After Class Practice 7/21 - Answer sheet

Nike, Inc.

STATEMENT OF CASH FLOWS 

Forecasted For Year Ended May 31, 2020          

After Class Practice 7/21 - Alexia Victor (alexia.victor@stern.nyu.edu) | Copyright  2021 Cambridge Business Publishers, All Rights Reserved
($ millions)
Net income $ 4,146 
Depreciation 751 
Amortization 2 
Stock-based compensation   325 
Accounts receivable  (333) 
Inventories  (461) 
Prepaid expenses and other current assets  (144) 
Deferred income taxes and other assets  (144) 
Accounts payable  218 
Accrued liabilities  397 
Income taxes payable  24 
Deferred income taxes and other liabilities 286 
Net cash from operating activities $ 5,067 

P11-44.Stat

Question 4 Marked out of 29.00

Statement of Cash Flows (Indirect Method)

Following are the income statement and balance sheet for Seagate Technology for the year ended June 28, 2019, and a
forecasted income statement and balance sheet for 2020.

SEGATE TECHNOLOGY PLC

Consolidated Statements of Income
June 2019 June 2020
For Years Ended ($ millions) Actual Est.
Revenue $10,390 $10,910
Cost of revenue 7,458 7,833
Product development 991 1,036
Marketing and administrative 453 480
Amortization of intangibles 23 23
Restructuring and other, net (22) 0
Total operating expense 8,903 9,372
Income from operations 1,487 1,538
Interest income 84 84
Interest expense (224) (224)
Other, net 25 25
Other expense, net (115) (115)
Income before income taxes 1,372 1,423
(Benefit) provision for income taxes (640) 299
Net income $2,012 $1,124

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7/31/2021 Course ID: 16382 - After Class Practice 7/21 - Answer sheet

SEGATE TECHNOLOGY PLC

Consolidated Balance Sheets
June 2019 June 2020

After Class Practice 7/21 - Alexia Victor (alexia.victor@stern.nyu.edu) | Copyright  2021 Cambridge Business Publishers, All Rights Reserved
For Years Ended ($ millions) Actual Est.
Current assets
Cash and cash equivalents $2,220 $2,583
Accounts receivable, net 989 1,036
Inventories 970 1,015
Other current assets 184 196
Total current assets 4,363 4,830
Property, equipment and leasehold improvements, net 1,869 1,971
Goodwill 1,237 1,237
Other intangible assets, net 111 88
Deferred income taxes 1,114 1,167
Other assets, net 191 196
Total Assets $8,885 $9,489
Current liabilities
Accounts payable $1,420 $1,495
Accrued employee compensation 169 175
Accrued warranty 91 98
Accrued expenses 552 578
Total current liabilities 2,232 2,346
Long-term accrued warranty 104 109
Long-term accrued income taxes 4 4
Other noncurrent liabilities 130 142
Long-term debt, less current portion 4,253 4,253
Total liabilities 6,723 6,854
Shareholders' equity
Ordinary shares—par value $0.0001,
2.6 billion shares authorized - -
Additional paid-in capital 6,545 6,644
Accumulated other comprehensive loss (34) (34)
Accumulated deficit (4,349) (3,975)
Total shareholders' equity 2,162 2,635
Total liabilities and shareholders' equity $8,885 $9,489

The following additional information pertains to the balance sheet and income statement for the year ended June 30, 2020 ($
millions).

Depreciation expense (included in operating expenses) $531

Stock-based compensation 99
Amortization expense 23
Capital expenditures 633
Dividends 750

Required

Prepare a forecasted statement of cash flows for June 2020 using the indirect method. (Hint: Stockbased compensation is a
noncash expense like depreciation and must be added back in the operating section. The amount expensed is also added to the
company’s
“Additional paid-in capital” account in the balance sheet.)

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7/31/2021 Course ID: 16382 - After Class Practice 7/21 - Answer sheet

SEAGATE TECHNOLOGY PLC

Statement of Cash Flows ($ Millions)
Forecasted for Year Ended June 30, 2020

After Class Practice 7/21 - Alexia Victor (alexia.victor@stern.nyu.edu) | Copyright  2021

Net income $ 1,124 
Add: Depreciation 531 
Add: Amortization 23 
Add Stock based compensation  99 
Accounts receivable, net increase (47) 
Inventories increase (45) 
Other current assets increase (12) 
Deferred income taxes increase (53) 
Other assets, net increase (5) 
Accounts payable increase 75 
Accrued employee compensation increase 6 
Accrued warranty increase 7 
Accrued expenses increase 26 
Long-term accrued warranty increase 5 
Other non-current liabilities increase 12 
Net Cash Provided by Operating Activities  1,746 

CAPEX  (633) 
Net Cash Used by Investing Activities  (633) 

Payment of dividends  (750) 

Net Cash Used by Financing Activities  (750) 

Net change in cash 363 

Beginning cash 2,220 
Ending cash $ 2,583 

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