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: Asset and Contra-Asset Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciation Liabilities and Stockholders' Equity Accounts $ 10 D Accounts payable $32 $ 14 1 Accrued liabilities $ 14 D $ 38 D Income taxes payable $ 19 1 $ 91 Bonds payable $124 I $ 11 D Common stock $ 56 D $245 I Retained earnings S521 $ 521 D=Decrease: 1 = Increase. Long-term investments that cost the company $11 were sold during the year for $26 and land that cost $25 was sold for $14. In addition, the company declared and paid $8 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: $720 306 414 320 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 $(11) 15 The company's beginning cash balance was $108 and its ending balance was $98.

Answer 1

1.

Pavolik Company Statement of Cash Flows ( Partial ) For the year ended...
Cash flows from Operating Activities
Net Income		60
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	52
Loss on sale of land	11
Gain on sale of investments	-15
Increase in accounts receivable	-14
Decrease in inventory	38
Increase in prepaid expenses	-9
Increase in accounts payable	32
Decrease in accrued liabilities	-14
Increase in income tax payable	19	100
Net cash provided by Operating Activities		160

2.

Pavolik Company Statement of Cash Flows For the year ended ....
Cash flows from Operating Activities
Net cash provided by Operating Activities		160
Cash flows from Investing Activities
Proceeds from sale of land	26
Proceeds from sale of investments	14
Net cash used in Investing Activities	-245
Net cash used in Investing Activities		- 205
Cash Flows from Financing Activities
Cash from issuance of bonds payable	124
Cash paid for treasury stock	-56
Cash dividends paid	-8
Net cash flows from Financing Activities		60
		15
Beginning cash and cash equivalents		108
Ending cash and cash equivalents		98