EXERCISE 14-4 Prepare a statement of Cash Flows (L014-1, L014-2] The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and Contra-Asset Accounts Cash .. $5 Accounts receivable ... . . . . . . . $110 Inventory ................... $70 Prepaid expenses ............ $9 Long-term investments ........ $6 Property, plant, and equipment ... $185 Accumulated depreciation ..... $60 D L D Liabilities and Equity Accounts Accounts payable ............ $35 Accrued liabilities Income taxes payable ......... $8 Bonds payable ............... .. $150 Common stock ... Common stock .............. $80 Retained earnings ............ $54 D D D 1 D = Decrease; I = Increase Long-term investments that had cost the company S6 were sold during the year for $16 and land that had cost $15 was sold for $9. In addition, the company declared and paid $30 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equip ment 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: $700 400 300 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 ............. log The company's beginning cash balance was $90 and its ending balance was $85. 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.
Related questions
The following changes took place last year in Pavolik Companyâs balance sheet accounts:
| Asset and Contra-Asset Accounts | Liabilities and Stockholders' Equity Accounts | ||||||
| Cash | $ | 32 | D | Accounts payable | $ | 98 | I |
| Accounts receivable | $ | 36 | I | Accrued liabilities | $ | 36 | D |
| Inventory | $ | 82 | D | Income taxes payable | $ | 41 | I |
| Prepaid expenses | $ | 31 | I | Bonds payable | $ | 300 | I |
| Long-term investments | $ | 33 | D | Common stock | $ | 144 | D |
| Property, plant, and equipment | $ | 575 | I | Retained earnings | $ | 118 | I |
| Accumulated depreciation | $ | 118 | I | ||||
D = Decrease; I = Increase.
Long-term investments that cost the company $33 were sold during the year for $70 and land that cost $69 was sold for $36. In addition, the company declared and paid $30 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 companyâs income statement for the year follows:
| Sales | $ | 1,380 | |||||
| Cost of goods sold | 614 | ||||||
| Gross margin | 766 | ||||||
| Selling and administrative expenses | 540 | ||||||
| Net operating income | 226 | ||||||
| Nonoperating items: | |||||||
| Loss on sale of land | $ | (33 | ) | ||||
| Gain on sale of investments | 37 | 4 | |||||
| Income before taxes | 230 | ||||||
| Income taxes | 82 | ||||||
| Net income | $ | 148 | |||||
The companyâs beginning cash balance was $152 and its ending balance was $120.
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.
