Homework SourseThe following changes took place last year in Pavolik Compan
The following changes took place last year in Pavolik Company’s balance sheet accounts:
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:
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.
| Asset and Contra-Asset Accounts | Liabilities and Stockholders\' Equity Accounts | ||||||
| Cash | $ | 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 | ||||
Solution
NET CASH FLOW FROM OPERATING ACTIVITY :
STATEMENT OF CASH FLOW :
| CASH RECEIVED FROM CUSTOMER (1050-25) | 1025 |
| LESS: CASH PAID FOR SUPPLIER (460-60-65) | (335) |
| LESS: CASH PAID FOR EXPENSES (430-85+25+20) | (390) |
| LESS: CASH PAID FOR INCOME TAX (60-30) | (30) |
| NET CASH FLOW FROM OPERATING ACTIVITY | 270 |
