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Exercise 12-4 Prepare a Statement of Cash Flows [LO12-1, LO12-2]

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

Asset and Contra-Asset Accounts				Liabilities and Equity Accounts
Cash	$	8	D	Accounts payable	$	26	I
Accounts receivable	$	12	I	Accrued liabilities	$	12	D
Inventory	$	34	D	Income taxes payable	$	17	I
Prepaid expenses	$	7	I	Bonds payable	$	108	I
Long-term investments	$	9	D	Common stock	$	48	D
Property, plant, and equipment	$	215	I	Retained earnings	$	46	I
Accumulated depreciation	$	46	I

D = Decrease; I = Increase.

Long-term investments that had cost the company $9 were sold during the year for $22, and land that had cost $21 was sold for $12. In addition, the company declared and paid $6 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			$	660
Cost of goods sold				278
Gross margin				382
Selling and administrative expenses				300
Net operating income				82
Nonoperating items:
Loss on sale of land	$	(9)
Gain on sale of investment		13		4
Income before taxes				86
Income taxes				34
Net income			$	52

The companys beginning cash balance was $104 and its ending balance was $96.

Required:

1.	Using the indirect method, determine the net cash provided by / used in operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

2.	Prepare a statement of cash flows for the year. (List any deduction in cash and cash outflows as negative amounts.)

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