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Exercise 12-4 Prepare a Statement of Cash Flows [LO12-1, LO12-2] The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and
Exercise 12-4 Prepare a Statement of Cash Flows [LO12-1, LO12-2] The following changes took place last year in Pavolik Company's balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Equity Accounts Accounts payable Accrued liabilities Income taxes payable Bonds payable Common stock Retained earnings Cash Accounts receivable $ 35 $ $ 8 $150 $ 80 D $ 54 I $ 5 D $ 110 4 D $ 70 D $ Inventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciation 9 I $ 6 D $ 185 60 Decrease; I = Increase. D Long-term investments that had cost the company $6 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 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: $700 400 Sales Cost of goods sold Gross margin Selling and administrative expenses 300 184 Net operating income Nonoperating items: Loss on sale of land Gain on sale of investments 116 $(6) 10 4 Income before taxes Income taxes 120 36 $ 84 Net income The company's beginning cash balance was $90 and its ending balance was $85. Required: 1. Using the indirect method, determine the net cash provided by used in operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.) Pavolik Company Statement of Cash Flows -Indirect Method (Partial) Net income $ 84 Adjustments to convert net income to a cash basis: $ Loss on sale of land Gain on sale of long-term investments (10) Depreciation 60 (110) Increase in accounts receivable Decrease in inventory 70 Increase in prepaid expenses (9) Increase in accounts payable 35 Decrease in accrued liabilities (4) Increase in income taxes payable 8 46 Net cash provided by operating activities 130 $ 2. Prepare a statement of cash flows for the year. (List any deduction in cash and cash outflows as negative amounts.) Pavolik Company Statement of Cash Flows-Indirect Method Operating activities: Investing activities: Proceeds from sale of long-term investments Proceeds from sale of land Additions to property, plant & equipment Net cash provided by investing activities 0 Financing Activities: Issuance of bonds payable Issuance of common stock Cash dividends 0 0 Beginning cash and cash equivalents $ Ending cash and cash equivalents 0
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