Question

The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and Contra-Asset Accounts Cash and cash equivalents 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 1 Accrued liabilities $ 26 D Income taxes payable $ 31 1 Bonds payable $ 220 I Common stock $ 104 D Retained earnings $ 88 I D = Decrease; I = 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 $(2 $ 108 The company's beginning cash balance was $132 and its ending balance was $110. 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

Answer-1)-

PAVOLIK COMPANY
STATEMENT OF CASH FLOWS PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED
Particulars		Amount
		$
Cash flow from operating activities
Net Income		108
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation		88
Loss on sale of land		23
Gain on sale of investments		-27
Change in operating assets & liabilities
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 taxes payable		31
Net cash flow from operating activities		280

2)-

PAVOLIK COMPANY
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED
Particulars		Amount
		$

Net cash flow from operating activities (a) 280

Cash Flow from Investing activities
Property,plant and equipment purchased		-474
Long term investment sold		50
Land sold		26
Net cash Flow from Investing activities (b)		-398
Cash Flow from Financing activities
Cash dividends paid		-20
Common stock purcahsed		-104
Bonds issued		220
Net cash Flow from Financing activities (c)		96
Net Change in cash c=a+b+c		-22
Beginning cash balance		132
Closing cash balance		110