Question

The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and Contra-Asset Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciation $ 22 D $ 26 I $ 62 D $ 21 I $ 23 D $ 425 I $ 88 I Liabilities and Stockholders' Equity Accounts Accounts payable $ 68 I Accrued liabilities $ 26 D Income taxes payable $ 31 1 Bonds payable $ 220 I Common stock $ 104 D Retained earnings $ 88 I D = Decrease; 1 = Increase. Long-term investments that cost the company $23 were sold during the year for $50 and land that cost $49 was sold for $26. In addition, the company declared and paid $20 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: $1,080 474 606 440 166 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Loss on sale of land Gain on sale of investments Income before taxes Income taxes Net income $(23) 27 178 170 62 $ 108 The company's beginning cash balance was $132 and its ending balance was $110.

Answer 1

Pavolik Company
Statement of Cash Flows
Operating activities:
Net Income	$108
Adjustments to convert net income to cash basis:
Loss on sale of land	$23
gain on sale of investments	($27)
Depreciation expense	$88
Increase in accounts receivable	($26)
Decrease in inventory	$62
Increase in prepaid expenses	($21)
Increase in accounts payable	$68
Decrease in accrued liabilities	($26)
Increase in income tax payable	$31
Net cash provided by operating activities		$280
Investing activities:
Proceeds from sale of land	$26
Proceeds from sale of long term investments	$50
Additions to property plant and equipment (425+49)	($474)
Net Cash used in investing activities		($398)
Financing activities
Issuance of bonds payable	$220
Purchase of common stock	($104)
Cash dividends	($20)
Net cash provided in financing activities		$96
Net decrease in cash		($22)
Beginning cash and cash equivalents		$132
Ending cash and cash equivalents		$110