Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following changes took place last year in Pavolik Companys balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Stockholders' Equity Accounts Cash $ 12

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

Asset and Contra-Asset Accounts Liabilities and Stockholders' Equity Accounts
Cash $ 12 D Accounts payable $ 42 I
Accounts receivable $ 145 I Accrued liabilities $ 4 D
Inventory $ 70 D Income taxes payable $ 15 I
Prepaid expenses $ 16 I Bonds payable $ 136 I
Long-term investments $ 13 D Common stock $ 59 D
Property, plant, and equipment $ 171 I Retained earnings $ 54 I
Accumulated depreciation $ 53 I

D = Decrease; I = Increase.

Long-term investments that cost the company $13 were sold during the year for $23 and land that cost $22 was sold for $16. 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 $ 680
Cost of goods sold 400
Gross margin 280
Selling and administrative expenses 184
Net operating income 96
Nonoperating items:
Loss on sale of land $ (6 )
Gain on sale of investments 10 4
Income before taxes 100
Income taxes 30
Net income $ 70

The companys beginning cash balance was $111 and its ending balance was $99.

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.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Statistical Analysis Microsoft Excel 2010

Authors: Conrad Carlberg

1st Edition

0789747200, 9780789747204

More Books

Students also viewed these Accounting questions

Question

Identify three improper customer etiquette behaviors.

Answered: 1 week ago