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	$	8	D	Accounts payable	$	26	I
Accounts receivable	$	12	I	Accrued liabilities	$	12	D
Inventory	$	34	D	Income taxes payable	$	17	I
Prepaid expenses	$	7	I	Bonds payable	$	108	I
Long-term investments	$	9	D	Common stock	$	48	D
Property, plant, and equipment	$	215	I	Retained earnings	$	46	I
Accumulated depreciation	$	46	I

D = Decrease; I = Increase.

Long-term investments that cost the company $9 were sold during the year for $22 and land that cost $21 was sold for $12. In addition, the company declared and paid $6 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					$	660
Cost of goods sold						278
Gross margin						382
Selling and administrative expenses						300
Net operating income						82
Nonoperating items:
Loss on sale of land	$	(9	)
Gain on sale of investments		13				4
Income before taxes						86
Income taxes						34
Net income					$	52

The company’s beginning cash balance was $104 and its ending balance was $96.

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

1) Net Cash Provided by Operating Activities :-

Particulars	Amount($)	Amount($)
Cash Flow from Operating Activities :-
Net Income		52
Add : Depreciation Charges	46
Add : Loss on Sale of Land	9
Less : Gain on Sale of Long-term Investments	(13)
Adjustments to Convert Net Income to a cash basis :-
Less : Increase in Accounts Receivable	(12)
Add : Decrease in Inventory	34
Less : Increase in Prepaid Expenses	(7)
Add : Increase in Accounts Payable	26
Less : Decrease in Accrued Liabilities	(12)
Add : Increase in Deferred Income Taxes	17	88
Net Cash Provided by Operating Activities		140

Cash Flow Statement :-

Particulars	Amount($)	Amount($)
Cash Flow from Operating Activities :-
Net Cash Provided by Operating Activities		140
Cash Flow from Investing Activities :-
Sale of Long-term Investments	22
Sale of Land	12
Purchase of Plant and Equipment	(215)
Net Cash Used for Investing Activities	(181)	(181)
Cash Flow from Financing Activities :-
Issue of Bonds Payable	108
Redemption of Common Stock	(48)
Cash Dividends Paid	(6)
Net Cash Flow from Financing Activities	54	54
Increase/Decrease in Cash		(8)
Add : Beginning Cash Balance		104
Ending Cash Balance		96

I am given best answer but after solve this answer i realise Land Value is Not given in Question.

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