Exercise 14-4 Prepare a Statement of Cash Flows

Special instructions: This exercise will be much easier to complete using Microsoft Excel, so use that application for this exercise.

The following changes took place last year in Pavolik Companys balance sheet accounts:

Asset and Contra-Asset Accounts			Liabilities and Stockholders Equity Accounts
Cash and cash equivalents	$5	D	Accounts payable	$35	I
Accounts receivable	$110	I	Accrued liabilities	$4	D
Inventory	$70	D	Income taxes payable	$8	I
Prepaid expenses	$9	I	Bonds payable	$150	I
Long-term investments	$6	D	Common stock	$80	D
Property, plant, and equipment	$185	I	Retained earnings	$54	I
Accumulated depreciation	$60	I
D = Decrease; I = Increase

Long-term investments that cost the company $6 were sold during the year for $16 and land that 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 companys income statement for the year follows:

Sales		$700
Cost of goods sold		400
Gross margin		300
Selling and administrative expenses		184
Net operating income		116
Nonoperating items:
Loss on sale of land	$(6)
Gain on sale of investments	10	4
Income before taxes		120
Income taxes		36
Net income		$84

The companys beginning cash balance was $90 and its ending balance was $85.

Required:

Use the indirect method to determine the net cash provided by operating activities for the year.

Prepare a statement of cash flows for the year.