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

Question

The following changes took place last year in Pavoliki Company's balance sheet accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments S 21 D Accounts payable S 251 Accrued labilities s 60 D Income taxes payable S 201 Bonds payable S 22 D Common stock 5 65 1 S 25 D s 30 I S 212 I S 100 D $ 85 I Property, plant, and equipment $410Retained earnings Accumulated depreciation S 85 I D Decrease; I Increase Long-term investments that had cost the company $22 were sold during the year for $48, and land that had cost $47 was sold for $25. In addition, the company declared and paid $19 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 $1,050 460 Gross margin Selling and administrative expenses 590 430 160 Net operating income Nonoperating items s (22) 26 Loss on sale of land Gain on sale of investment Income before taxes Income taxes 164 60 Net income S 104 The company's beginning cash balance was $130 and its ending balance was $109 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 Company Statement of Cash Flows- Indirect Method (Partial) Adjustments to convert net income to a cash basis

Explanation / Answer

Note: The increase in property, plant, and equipment is $410 however it is reduced by the cost of land sold $47. Hence purchase of property, plant, and equipment is $457 ($410 + $47).

1 Pavolik Company Statement of Cash Flows - Indirect Method (Partial) Net income 104 Adjustments to convert net income to a cash basis: Depreciation expense 85 Loss on sale of land 22 Gain on sale of investments -26 Increase in accounts receivable -25 Decrease in inventory 60 Increase in prepaid expenses -20 Increase in accounts payable 65 Decrease in accrued liabilities -25 Increase in income taxes payable 30 166 Net cash provided by operating activities 270

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