Required: Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (Amounts to be deducted, cash outflows, and any decrease in cash should be indicated with a minus sign.) VIDEO PHONES, INCORPORATED Statement of Cash Flows For the Year Ended December 31, 2024 Cash Flows from Operating Activities: Adjustments to reconcile net income to net cash flows from operating activities: Net cash flows from operating activities Cash Flows from Investing Activities: Net cash flows from investing activities Cash Flows from Financing Activities: Net cash flows from financing activities Cash at the beginning of the period Cash at the end of the period Note: Noncash Activities $ $ 0 0 0 0 Problem 11-4A (Algo) Prepare a statement of cash flows-indirect method (LO11-2, 11-3, 11-4, 11-5) The income statement, balance sheets, and additional information for Video Phones, Incorporated, are provided. VIDEO PHONES, INCORPORATED Income Statement For the Year Ended December 31, 2024 Net sales Expenses: Cost of goods sold Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense Total expenses Net income Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investments $1,750,000 818,000 23,000 7,600 13,000 44,000 Land Equipment Accumulated depreciation Accounts payable Interest payable VIDEO PHONES, INCORPORATED Balance Sheets December 31 $2,816,000 2,655,600 $ 160,400 Total assets Liabilities and Stockholders' Equity Current liabilities: Additional Information for 2024: Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity 2024 2023 $179,760 $111,080 76,600 56,000 105,000 131,000 9,840 4,920 101,000 0 206,000 232,000 262,000 206,000 (64,200) (41,200) $876,000 $699,800 $ 62,400 $ 77,000 5,600 9,200 14,600 13,600 277,000 221,000 260,000 260,000 256,400 119,000 $876,000 $699,800 1. Purchased investment in bonds for $101,000. 2. Sold land for $18,400. The land originally was purchased for $26,000, resulting in a $7,600 loss being recorded at the time of the sale. 3. Purchased $56,000 in equipment by issuing a $56,000 long-term note payable to the seller. No cash was exchanged in the transaction. 4. Declared and paid a cash dividend of $23,000.
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.
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