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Exercises lI ? | Not secure l eztomheducation.com/hrm.tpx?:029768729857850331522786004919 The following changes took place last year in Pavolik Company's balance sheet accounts 11Asset and Contra-Asset Accounts Cash Accounts receivable Inventory Prepaid expenses Long-term investments Property, plant, and equipment 185 Accumulated depreciation Liabilities and Equity Accounts S 5 D Accounts payable S 110 Accrued liabilities S 70 D Income taxes payable S 91 Bonds payable S 6 D Common stock s 35 I S 81 S 150 I s 80 D s 54 1 Retained earmings s 60 I D = Decrease, 1 : 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 company's income statement for the year follows Sales Cost of goods sold $ 700 400 Gross margn Selling and administrative expenses 300 184 116 Net operating income Nonoperating items Loss on sale of land Gain on sale of investments 10 4 120 Income before taxes Income taxes 36 Net income s 84 The company's beginning cash balance was $90 and its ending balance was $85 O Type here to search

Explanation / Answer

Pavolik Company Statement of Cash Flows (partial) Net Income 84 Adjustments to convert net income to a cash basis: Depriciation 60 Increase in accounts receivable -110 Decrease in inventory 70 Increase in prepaid expenses -9 Increase in accounts payable 35 Decrease in accrued liabilities -4 Increase in income taxes payable 8 Gain on sale of long-term investments -10 Loss on sale of land 6 46 Net cash provided by operating activities 130 Pavolik Company Statement of Cash Flows Operating Activities Net Cash provided by operating activities 130 Investing Activities Proceeds from sale of long-term investments 16 Proceeds from sale of land 9 Additions to property, plant & equipment -200 Net cash used in investing activities -175 Financing activities Issuance of bonds payable 150 Purchase of common stock -80 Cash dividends -30 Net cash provided by financing activities 40 Net decrease in cash -5 Beginning cash and cash equivalents 90 Ending cash and cash equivalents 85

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