The following changes took place last year in Pavolik Company\'s balance sheet a

Question

The following changes took place last year in Pavolik Company's balance sheet accounts: Liabilities and Stockholders' Equity Accounts Asset and Contra-Asset Accounts Cash Accounts receivable Lnventory Prepaid expenses Long-term investments Property, plant, and equipment Accumulated depreciation $ 27 D Accounts payable $ 31 I Accrued liabilities $ 72 D Income taxes payable $ 26 I Bonds payable $ 28 D Common stock $500 I Retained earnings $103 I $ 83 I $ 31 D $ 36 I $260 I $124 D $103 I D = Decrease: I = Increase Long-term investments that cost the company $28 were sold during the year for $60 and land that cost $59 was sold for $31. In addition, the company declared and paid $25 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

Explanation / Answer

STATEMENT OF CASH FLOWS Cash flow from operating activities: Net income 128 Adjustments to reconcile net income with net cash from operating activities: Depreciation 103 Loss on sale of land 28 Gain on sale of investments -32 Increase in accounts receivable -31 Decrease in inventory 72 Increase in prepaid expenses -26 Increase in accounts payable 83 Decrease in accrued liabilities -31 Increase in income taxes payable 36 202 Net cash from operating activities 330 Cash flow from investing activities: Purchase of Property, Plant and equipment -559 Sale of land 31 Sale of long term investments 60 Net cash from investing activities -468 Cash flow financing activities: Issue of bonds 260 Purchase of treasury stock -124 Dividends paid -25 Net cash from financing activities 111 Decrease in cash and cash equivalents -27 Beginning balance of cash and cash equivalents 142 Ending balance of cash and cash equivalents 115

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