Question
The following changes took place last year in Pavolik Companys balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Equity Accounts Cash $ 5 D
The following changes took place last year in Pavolik Companys balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Equity Accounts Cash $ 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 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 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 direct method to convert the company's income statement to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)
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