Question

For the just completed year, Hanna Company had net income of $82,500. Balances in the company’s current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Year Beginning of Year Current assets: Cash and cash equivalents $ 60,000 $ 76,000 Accounts receivable $ 168,000 $ 182,000 Inventory $ 430,000 $ 346,000 Prepaid expenses $ 12,000 $ 13,000 Current liabilities: Accounts payable $ 364,000 $ 394,000 Accrued liabilities $ 8,000 $ 12,000 Income taxes payable $ 33,000 $ 25,000 The Accumulated Depreciation account had total credits of $46,000 during the year. Hanna Company did not record any gains or losses during the year. Required: Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

part 2

The following changes took place last year in Pavolik Company’s balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Stockholders' Equity Accounts Cash $ 8 D Accounts payable $ 26 I Accounts receivable $ 12 I Accrued liabilities $ 12 D Inventory $ 34 D Income taxes payable $ 17 I Prepaid expenses $ 7 I Bonds payable $ 108 I Long-term investments $ 9 D Common stock $ 48 D Property, plant, and equipment $ 215 I Retained earnings $ 46 I Accumulated depreciation $ 46 I D = Decrease; I = Increase. Long-term investments that cost the company $9 were sold during the year for $22 and land that cost $21 was sold for $12. In addition, the company declared and paid $6 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 $ 660 Cost of goods sold 278 Gross margin 382 Selling and administrative expenses 300 Net operating income 82 Nonoperating items: Loss on sale of land $ (9 ) Gain on sale of investments 13 4 Income before taxes 86 Income taxes 34 Net income $ 52 The company’s beginning cash balance was $104 and its ending balance was $96. Required: 1. Use the indirect method to determine the net cash provided by operating activities for the year. 2. Prepare a statement of cash flows for the year.

Answer 1

As per the HOMEWORKLIB POLICY the only first question should be answered completely. Kindly take note of it.

Hanna Company

Statement of cash flows - indirect method (partial)

Net income		82500
Adjustments to convert net income to a cash basis:
Depreciation	46000
Decrease in accounts receivable (168000-182000)	14000
Increase in inventory (430000-346000)	(84000)
Decrease in prepaid expenses (12000-13000)	1000
Decrease in accounts payable (364000-394000)	(30000)
Decrease in accrued liabilities (8000-12000)	(4000)
Increase in income taxes payable (33000-25000)	8000
		(49000)
Net cash provided by operating activities		33500