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 Liabilities and Equity Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipment 515 Accumulated depreciation $ 28 D Accounts payable $ 32 I Accrued liabilities $ 74 D Income taxes payable $ 27 ds payable $ 29 D Common stock $ 86 I $ 32 D $ 37 I $ 268 I $ 128 D $ 106 I Retained earnings $ 106 D Decrease, lIncrease Long-term investments that had cost the company $29 were sold during the year for $62, and land that had cost $61 was sold for $32. In addition, the company declared and paid $26 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 $1,260 558 Gross margin Selling and administrative expenses 702 500 202 Net operating income Nonoperating items Loss on sale of land $ (29) Gain on sale of investment 4 Income before taxes Income taxes 206 74 Net income $ 132 The company's beginning cash balance was $144 and its ending balance was $116

Explanation / Answer

1. Net cash flow from operating activities under indirect method :

Statement of cash flow :

Net income 132 Adjustment to reconcile net income Depreciation expenses 106 Gain on sale of investment (33) Loss on sale of land 29 Increase account receivable (32) Increase prepaid expenses (27) Decrease inventory 74 Increase account payable 86 Increase income tax payable 37 Decrease accured liabilities (32) Net cash flow from operating activities 340

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