Assets Cash $ 782,470 $ 845,170 Accounts receivable (net) 712,050 649,450 Inventories 1,079,810 993,740 Prepaid expenses 25,040 29,730 Land 269,170 406,880 Buildings 1,244,130 766,820 Accumulated depreciation-buildings (352,110) (328,640) Equipment 438,180 387,320 Accumulated depreciation-equipment (120,500) (135,370) Total assets $4,078,240 $3,615,100 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $ 774,870 $ 817,680 Bonds payable 228,380 0 Common stock, $20 par 267,000 99,000 Paid-in capital: Excess of issue price over par-common stock 644,000 476,000 Retained earnings 2,163,990 2,222,420 Total liabilities and stockholders' equity $4,078,240 $3,615,100 The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows: ACCOUNT Land ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 406,880 Apr. 20 Realized $128,100 cash from sale 137,710 269,170 ACCOUNT Buildings ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 766,820 Apr. 20 Acquired for cash 477,310 1,244,130 ACCOUNT Accumulated Depreciation-Buildings ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 328,640 Dec. 31 Depreciation for year 23,470 352,110 ACCOUNT Equipment ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 387,320 Jan. 26 Discarded, no salvage 42,600 344,720 Aug. 11 Purchased for cash 93,460 438,180 ACCOUNT Accumulated Depreciation-Equipment ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 135,370 Jan. 26 Equipment discarded 42,600 92,770 Dec. 31 Depreciation for year 27,730 120,500 ACCOUNT Bonds Payable ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 May 1 Issued 15-year bonds 228,380 228,380 ACCOUNT Common Stock, $20 par ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 99,000 Dec. 7 Issued 8,400 shares of common stock for $40 per share 168,000 267,000 ACCOUNT Paid-in Capital in Excess of Par-Common Stock ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 476,000 Dec. 7 Issued 8,400 shares of common stock for $40 per share 168,000 644,000 ACCOUNT Retained Earnings ACCOUNT NO. Balance Date Item Debit Credit Debit Credit 20Y2 Jan. 1 Balance 2,222,420 Dec. 31 Net loss 28,130 2,194,290 Dec. 31 Cash dividends 30,300 2,163,990 Required: Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
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.
he comparative
| Dec. 31, 20Y2 | Dec. 31, 20Y1 | ||||
| Assets | |||||
| Cash | $ 782,470 | $ 845,170 | |||
| 712,050 | 649,450 | ||||
| Inventories | 1,079,810 | 993,740 | |||
| Prepaid expenses | 25,040 | 29,730 | |||
| Land | 269,170 | 406,880 | |||
| Buildings | 1,244,130 | 766,820 | |||
| (352,110) | (328,640) | ||||
| Equipment | 438,180 | 387,320 | |||
| Accumulated depreciation-equipment | (120,500) | (135,370) | |||
| Total assets | $4,078,240 | $3,615,100 | |||
| Liabilities and |
|||||
| Accounts payable (merchandise creditors) | $ 774,870 | $ 817,680 | |||
| Bonds payable | 228,380 | 0 | |||
| Common stock, $20 par | 267,000 | 99,000 | |||
| Paid-in capital: Excess of issue price over par-common stock | 644,000 | 476,000 | |||
| 2,163,990 | 2,222,420 | ||||
| Total liabilities and stockholders' equity | $4,078,240 | $3,615,100 |
The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows:
| ACCOUNT Land | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 406,880 | |||
| Apr. 20 | Realized $128,100 cash from sale | 137,710 | 269,170 |
| ACCOUNT Buildings | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 766,820 | |||
| Apr. 20 | Acquired for cash | 477,310 | 1,244,130 |
| ACCOUNT Accumulated Depreciation-Buildings | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 328,640 | |||
| Dec. 31 | Depreciation for year | 23,470 | 352,110 |
| ACCOUNT Equipment | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 387,320 | |||
| Jan. 26 | Discarded, no salvage | 42,600 | 344,720 | ||
| Aug. 11 | Purchased for cash | 93,460 | 438,180 |
| ACCOUNT Accumulated Depreciation-Equipment | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 135,370 | |||
| Jan. 26 | Equipment discarded | 42,600 | 92,770 | ||
| Dec. 31 | Depreciation for year | 27,730 | 120,500 |
| ACCOUNT Bonds Payable | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| May 1 | Issued 15-year bonds | 228,380 | 228,380 |
| ACCOUNT Common Stock, $20 par | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 99,000 | |||
| Dec. 7 | Issued 8,400 shares of common stock for $40 per share |
168,000 | 267,000 |
| ACCOUNT Paid-in Capital in Excess of Par-Common Stock | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 476,000 | |||
| Dec. 7 | Issued 8,400 shares of common stock for $40 per share |
168,000 | 644,000 |
| ACCOUNT Retained Earnings | ACCOUNT NO. | ||||
| Balance | |||||
| Date | Item | Debit | Credit | Debit | Credit |
| 20Y2 | |||||
| Jan. 1 | Balance | 2,222,420 | |||
| Dec. 31 | Net loss | 28,130 | 2,194,290 | ||
| Dec. 31 | Cash dividends | 30,300 | 2,163,990 |
Required:
Prepare a statement of
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