Exercise 14-4 (continued)
Because Pavolik did not retire any bonds or issue any of its own stock
during the year, the corresponding amounts in the table on the prior
page represent the gross cash flows that are included in the statement
Exercise 14-5 (10 minutes)
Item
Amount
Add
Subtract
Accounts receivable ……………….
$90,000
decrease
X
Inventory …………………………….
$120,000
increase
X
Prepaid expenses …………………..
$3,000
decrease
X
Accounts payable …………………..
$65,000
decrease
X
Accrued liabilities …………………..
$8,000
increase
X
Income taxes payable …………….
$12,000
increase
X
Sale of equipment ………………….
$7,000
gain
X
Sale of long-term investments ….
$10,000
loss
X
Exercise 14-6 (continued)
Investing and Financing activities:
The guidelines from Exhibit 14-3 can be used to analyze the changes in
noncash balance sheet accounts that impact investing and financing
Problem 14-7 (30 minutes)
1. Net cash provided by operating activities:
Step 1: The following equation can be applied to the Accumulated
Depreciation account to compute the depreciation to add back to net
income:
Beginning balance – Debits + Credits = Ending balance
Problem 14-7 (continued)
The decrease in the long-term investments account ($3) equals the cost
of the long-term investment sold; therefore, Weaver did not purchase
any long-term investments during the year. The proceeds from the sale
recorded as a cash inflow.
Retained earnings:
Beginning balance – Debits + Credits = Ending balance
$74 – Debits + $63 = $107
