QUESTION 1 QUESTION 2 The following changes took place last year in Pavolik Comp

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QUESTION 1

QUESTION 2

The following changes took place last year in Pavolik Company's balance sheet accounts Asset and Contra-Asset Accounts Liabilities and Equity Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipmert Accumulated depreciation $ 29 D Accounts payable $ 33 1 Accrued liabilities $ 76 D Income taxes payable $ 28Bonds payable $ 89 I $ 33 D $ 38 I $276 I $132 D 109 I 30 D Common stock $ 530 I Retained earnings 109 I D = Decrease-Increase Long-term investments that had cost the company $30 were sold during the year for $64, and land that had cost $63 was sold for $33. In addition, the company declared and paid $27 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock The company's income statement for the year follows Sales Cost of goods sold $1,290 572 Gross margin Selling and administrative expenses 718 510 Net operating income Nonoperating items 208 $ (30) 34 Loss on sale of land Gain on sale of investment Income before taxes Income taxes 212 76 Net income $ 136 The company's beginning cash balance was $146 and its ending balance was $117

Explanation / Answer

2)

Net income $136 Adjustments to convert net income to a cash basis: Depreciation charges...................................... $109 Increase in accounts receivable....................... -33 Decrease in inventory..................................... 76 Increase in prepaid expenses.......................... -28 Increase in accounts payable.......................... 89 Decrease in accrued liabilities.......................... -33 Gain on sale of long-term investments.............. -34 Loss on sale of land........................................ 30 Increase in income taxes payable.................... 38 $214 Net cash provided by operating activities............. $350

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