Question

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 and cash equivalents	$	21	D	Accounts payable	$	65	I
Accounts receivable	$	25	I	Accrued liabilities	$	25	D
Inventory	$	60	D	Income taxes payable	$	30	I
Prepaid expenses	$	20	I	Bonds payable	$	212	I
Long-term investments	$	22	D	Common stock	$	100	D
Property, plant, and equipment	$	410	I	Retained earnings	$	85	I
Accumulated depreciation	$	85	I

D = Decrease; I = Increase.

Long-term investments that cost the company $22 were sold during the year for $48 and land that cost $47 was sold for $25. In addition, the company declared and paid $19 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					$	1,050
Cost of goods sold						460
Gross margin						590
Selling and administrative expenses						430
Net operating income						160
Nonoperating items:
Loss on sale of land	$	(22	)
Gain on sale of investments		26				4
Income before taxes						164
Income taxes						60
Net income					$	104

The company’s beginning cash balance was $130 and its ending balance was $109.

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.

The company’s beginning cash balance was $130 and its ending balance was $109

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.

The company’s beginning cash balance was $130 and its ending balance was $109.

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.

Prepare a statement of cash flows for the yearr. (List any deduction in cash and cash outflows as negative amounts.)

Use the indirect method to determine the net cash provided by operating activities for the year. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Pavolik Company Statement of Cash Flows (partial)

Answer 1

1.

Pavolik Company Statement of Cash Flows (Partial)
Operating activities
Net income		$104
Adjustment to net income
Depreciation expense	$85
Loss on sale of land	22
Gain on sale of investments	-26
Accounts receivable	-25
Inventory	60
Prepaid expenses	-20
Accounts payable	65
Accrued liabilities	-25
Income tax payable	30
		166
Net cash provided (used) by operating activities		$270

2.

Pavolik Company Statement of Cash Flows
Operating activities:
Net cash provided by operating activities		$270
Investing activities:
Sale of long term investments	$48
Purchases of property, plant and equipment ($410+47)	-457
Sale of land	25
Net cash provided by investing activities		-384
Financing activities:
Issue of bonds payable	212
Purchase of common stock	-100
Cash dividends	-19
Net cash provided by financing activities		93
Net increase / (Decrease) in cash		-21
Beginning cash and cash equivalents		130
Ending cash and cash equivalents		$109