Exercise 14-3 Preparing a Cash Flow Statement-Indirect Method (LO2-CC3) The following changes took place during the year in Pavolik Company's balance sheet accounts: Cash Accounts receivable Inventory Prepaid expenses Long-term investments Plant and equipment Accumulated depreciation $ 5 D Accounts payable $ 110 I Accrued liabilities $ 70 D Bonds payable $ 35 I $ 4 D $150 I 9 I Deferred income taxes liability $ 8 I $ 6 D Common shares $ 80 D $ 200 I Retained earnings $ 54 I $ (60) I Land $ 15 D D= Decrease; I = Increase 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. No sales or retirements of plant and equipment took place during the year. The company's income statement for the year follows: Sales Less: Cost of goods sold $ 700 400 Gross margin 300 Less: Operating expenses 184 Net operating income 116 Non operating items: Gain on sale of investments $ 10 Loss on sale of land (6) 4 Income before taxes Less: Income taxes Net income 120 36 $ 84 4