a. Prepare the statement of cash flows using the indirect method. Include any supplemental disclosures. (Enter any deduction: and cash outflows as a negative value.) WICKER SHAM BROTHERS Inc. Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Adjustments to reconcile net income to net cash provided by operating activities: Changes in current assets and current liabilites: Cash Flows from Investing Activities: Cash Flows from Financing Activities: Cash and Cash Equivalents, beginning of period Cash and Cash Equivalents, end of period Supplemental Disclosures:
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![Problem 12-199 [LO 12-2, LO 12-3, LO 12-4, LO 12-5]
The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete
except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized.
Prior Year
Current Year
Balance Sheet
Assets
Cash
Accounts receivable
Merchandise inventory
Property and equipment
Less: Accumulated depreciation
$184, 100
132, 000
99,000
188, e00
(54,320)
$468, 780
$122,700
115,500
107, 250
99, e00
(28,000)
$416,450
Total assets
Liabilities:
Accounts payable
Salaries and Wages Payable
Notes payable, long-term
Stockholders' Equity:
$ 16,500
3, 300
82,500
$ 19,800
1,650
99,000
Common stock
152, 000
214,480
$468, 780
132, e00
164, e00
Retained earnings
Total liabilities and stockholders' equity
$416,450
Income Statement
Sales
Cost of goods sold
Depreciation expense
Other expenses
$460, 000
240, e00
26, 320
115, e00
Net income
$ 78,680
Other information from the company's records includes the following:
Bought equipment for cash, $89,000.
Paid $16,500 on long-term note payable.
Issued new shares of common stock for $20.000 cash.
• Cash dividends of $28,200 were declared and paid to stockholders.
• Accounts Payable arose from inventory purchases on credit.
Income tax expense ($19,670) and interest expense ($4.950) were paid in full at the end of both years and are included in
Other Expenses.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7f57acd-42b9-466e-a85d-4609f38f005a%2F27791bb5-0227-4b97-aec5-22411dc42770%2F9glqgii_processed.png&w=3840&q=75)
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