The following changes took place last year in Pavolik Company\'s balance sheet a

Question

The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and Contra-Asset Accounts and Equity Accounts Cash S 11 D Accounts payable 5 15 Accrued liabilities 5 40 D Income taxes payable $ 10 Bonds payable S 12 D Common stock 5 280 Retained earnings S 55 I 5 35 I S 15 D 5 20 I S 132 I S 80 D S 55 I Prepaid expenses Property, plant, and equipment D Decrease. I = increase. Long-term investments that had cost the company $12 were sold during the year for $28, and land that had cost $27 was sold for $15. In addition, the company declared and paid S9 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: S 750 Sales Cost of goods sold Gross margin Selling and administrative expenses 430 330 Net operating income Nonoperating items: 100 S (12) 16 Loss on sale of land Gain on sale of investment Income before taxes Income taxes 104 40 Net income 5 64 The company's beginning cash balance was $110 and its ending balance was e. 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.) Pavolik Statement of Cash Flows - Indirect Method Adjustments to convert net income to a cash basis:

Explanation / Answer

Pavolik Company- Cash flow Statement 1.Operating activities Net Income for the Year 64 Adjustments for non-cash items: Add: Loss on Sale of land 12 Less: Gain on sale of Investments -16 Add: Depreciation for the Year(55-27) 28 24 88 Less: Increase in Accounts Receivables -15 Add: Decrease in Inventory 40 Less: Increase in Prepaid Expenses -10 Add: Increase in Accounts Payables 35 Less: Decrease in Accrued Liabilities -15 Add: Increase in Income taxes Payables 20 Cash generated from operating activities 143 2 Investing activities Sale Proceeds of long-term Investments 28 Sale Proceeds of Land 15 Purchase of PP&E -260 -217 Cash used by Investing activities Financing activities Increase in Bonds Payables 132 Repurchase of stock -60 Payment of Dividend -9 Cash generated by Financing activities 63 Net Decrease in Cash -11 Add: Opening Balance 110 Closing Balance 99

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