Accountants for Putterham, Inc. have assembled the following data for the year ended December 31, 2018: 2018 2017 Current Assets: Cash $ 99,400 $ 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800 Transaction Data for 2018: Issuance of common stock for cash $ 38,000 Payment of notes payable $ 46,100 Depreciation expense 24,000 Payment of cash dividends 50,000 Purchase of equipment with cash 74,000 Issuance of notes payable to borrow cash 62,000 Acquisition of land by issuing long-term notes payable 119,000 Gain on sale of building 4,500 Book value of building sold 54,000 Net income 68,500 Prepare Putterham’s statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.
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.
Accountants for Putterham, Inc. have assembled the following data for the year ended December 31, 2018:
|
|
2018 |
2017 |
|
Current Assets: |
|
|
|
Cash |
$ 99,400 |
$ 25,000 |
|
|
64,100 |
69,700 |
|
Merchandise Inventory |
83,000 |
75,000 |
|
Current Liabilities: |
|
|
|
Accounts Payable |
57,600 |
55,200 |
|
Income Tax Payable |
14,800 |
16,800 |
|
Transaction Data for 2018: |
|
|
|
|
Issuance of common stock for cash |
$ 38,000 |
Payment of notes payable |
$ 46,100 |
|
|
24,000 |
Payment of cash dividends |
50,000 |
|
Purchase of equipment with cash |
74,000 |
Issuance of notes payable to borrow cash |
62,000 |
|
Acquisition of land by issuing long-term notes payable |
119,000 |
Gain on sale of building |
4,500 |
|
Book value of building sold |
54,000 |
Net income |
68,500 |
Prepare Putterham’s statement of
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
