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

Asset and Contra-Asset Accounts			Liabilities and Stockholders' Equity Accounts
Cash	$ 11	D	Accounts payable	$ 35	I
Accounts receivable	$ 15	I	Accrued liabilities	$ 15	D
Inventory	$ 40	D	Income taxes payable	$ 20	I
Prepaid expenses	$ 10	I	Bonds payable	$ 132	I
Long-term investments	$ 12	D	Common stock	$ 60	D
Property, plant, and equipment	$ 260	I	Retained earnings	$ 55	I
Accumulated depreciation	$ 55	I

D = Decrease; I = Increase.

Long-term investments that cost the company $12 were sold during the year for $28 and land that cost $27 was sold for $15. In addition, the company declared and paid $9 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		$ 750
Cost of goods sold		320
Gross margin		430
Selling and administrative expenses		330
Net operating income		100
Nonoperating items:
Loss on sale of land	$ (12)
Gain on sale of investments	16	4
Income before taxes		104
Income taxes		40
Net income		$ 64

The companys beginning cash balance was $110 and its ending balance was $99.

Required:

1.

Use the indirect method to determine the net cash provided by operating activities for the year. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

Pavolik Company
Statement of Cash Flows (partial)
Net income		$64
Adjustments to convert net income to a cash basis:
Depreciation	$55
Loss on sale of land	12
Gain on sale of long-term investments	(16)
Increase in accounts receivable	(15)
Decrease in inventory	40
Increase in prepaid expenses	(10)
Increase in accounts payable	35
Decrease in accrued liabilities	(15)
Increase in income taxes payable	20
		106
Net cash provided by operating activities		$170

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
Operating activities:
Net cash provided by operating activities		$170
Investing activities:
Additions to property, plant & equipment
Proceeds from sale of long-term investments	28
Proceeds from sale of land	15
		43
Financing activities:
Issuance of bonds payable	132
Purchase of common stock	(60)
Cash dividends paid	(9)
Net cash provided by financing activities		63
Net decrease in cash		276
Beginning cash and cash equivalents
Ending cash and cash equivalents		$276