Exercise 14-4 Prepare a Statement of Cash Flows [LO14-1, LO14-2] The following c

Question

Exercise 14-4 Prepare a Statement of Cash Flows [LO14-1, LO14-2] The following changes took place last year in Pavolik Company's balance sheet accounts: abilities and Stockholders' Equity Accounts Asset and Contra-Asset Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciatiorn S 26 D Accounts payable $ 30I Accrued liabilities $ 70 D Income taxes payable $ 25I Bonds payable $ 27 D Common stock $ 485 I Retained earnings $ 80 I 30 D S 35 I S 252 I 120 D $ 100 I 100 I D Decrease: I = Increase Long-term investments that cost the company $27 were sold during the year for $58 and land that cost $57 was sold for $30. In addition, the company declared and paid $24 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 Gross margin Selling and administrative expenses Net operating income Nonoperating items: $1,200 530 670 480 190 S (27) 31 Loss on sale of land Gain on sale of investments Income before taxes Income taxes Net income 4 194 70 $ 124

Explanation / Answer

1) Statement of cash flow from operating activities :

Statment of cash flow :

Net income 124 Adjustment to reconcile net income depreciation expenses 100 Loss on sale of land 27 Gain on sale of investment (31) Increase account receivable (30) Decrease inventory 70 Increase prepaid expenses (25) Increase account payable 80 Decrease accured liabilities (30) Increase income tax payable 35 Net cash flow from operating activities 320

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