The following changes took place last year in Pavolik Company’s balance sheet ac

Question

The following changes took place last year in Pavolik Company’s balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Equity Accounts Cash $ 7 D Accounts payable $ 23 I Accounts receivable $ 11 I Accrued liabilities $ 11 D Inventory $ 32 D Income taxes payable $ 16 I Prepaid expenses $ 6 I Bonds payable $ 100 I Long-term investments $ 8 D Common stock $ 44 D Property, plant, and equipment $ 200 I Retained earnings $ 43 I Accumulated depreciation $ 43 I D = Decrease; I = Increase. Long-term investments that had cost the company $8 were sold during the year for $20, and land that had cost $19 was sold for $11. In addition, the company declared and paid $5 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 $ 630 Cost of goods sold 264 Gross margin 366 Selling and administrative expenses 290 Net operating income 76 Nonoperating items: Loss on sale of land $ (8) Gain on sale of investment 12 4 Income before taxes 80 Income taxes 32 Net income $ 48 The company’s beginning cash balance was $102 and its ending balance was $95. Required: 1. Using the indirect method, determine the net cash provided by / used in operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.) 2. Prepare a statement of cash flows for the year. (List any deduction in cash and cash outflows as negative amounts.)

Explanation / Answer

1) Net cash provided by in operating activities for the year

2) Statement of Cash flow

Net Income $   48.00 Depreciation Change $   43.00 Increase In accounts receivable $ -11.00 Decrease in Inventory $   32.00 Increase in prepaid expenses $    -6.00 Increase in accounts payable $   23.00 Decrease in accrued liabilities $ -11.00 Gain on sale of long term investments $ -12.00 loss on sale of Land $      8.00 Increase in deferred income taxes $   16.00 Net Cash Provided by Operating Activities $ 130.00

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